Sika Business Year

sika business year

2014annualreport.sika.com

Sika Annual Report 2014 1 Content

Facts & Figures 3 Letter to Shareholders 5 Customer Focus 7

Investment in Sika 17 Stock Price Development 18 Risk Management 19

Leadership 21 Organization & Leadership 22 Group Management 23 Organizational Diagram 26 Board of Directors 27

Strategy & Focus 29 Strategy 30 The Sika Brand 31 Customers & Markets 32 Products & Innovations 34 Sustainable Development 37 Acquisitions & Investments 39

Group Review 41 Group Report 42 Group Report Regions 44 Outlook 46 Sustainability Report 47 Employees 54

Corporate Governance 56

COMPENSATION REPORT 60

Financial Report 78 Consolidated Financial Statements 79 Appendix to the Consolidated Financial Statements 84 Five-Year Reviews 130 Sika AG Financial Statements 135

Financial Calendar 145 Imprint 146

Sika Annual Report 2014 Content 2 Facts & Figures Record results in all areas

Sika Group

as % of as % of in CHF mn 2013 net sales 2014 net sales

Net sales 5,142.2 5,571.3 Gross result 2,695.6 52.4 2,951.3 53.0 Operating profit before depreciation 675.9 13.1 798.3 14.3 (EBITDA) Operating profit (EBIT) 523.5 10.2 633.2 11.4 Net profit 344.7 6.7 441.2 7.9 Operating free cash flow 432.7 8.4 417.5 7.5 Capital expenditures 153.9 3.0 152.7 2.7 Balance sheet total 4,735.9 4,817.9 Shareholders, equity 2,136.2 2,383.3 Equity ratio in % 45.1 49.5 ROCE in % 21.0 23.3 Earnings per share (EPS) in CHF 135.27 173.19 Number of employees 16,293 16,895 Waste (total waste per ton sold) in t 0.0181 0.0179 Water (total water per ton sold) in m³ 0.67 0.60 Energy (total energy per ton sold) 0.54 0.48 in GJ

Sika Annual Report 2014 Facts & Figures 3 NET SALES (consolidated) in CHF mn , .

. ROCE in %

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EBIT NET PROFIT OPERATING FREE CASH FLOW in CHF mn in CHF mn in CHF mn . . -.

netNETTOERLÖS sales b yNACH reg ioREGIONENn (consol (KONSOLIDIERT)idated) netNETTOERLÖS sales by NACH mar ketGESCHÄFTSBEREICHEN (consolidated) (KONSOLIDIERT)

EMEA Industry 49.1% 19.1% (CHF 2,734 mn) (CHF 1,065 mn)

Other Segments and Activities North america 7.4% (CHF 413 mn) 13.4% (CHF 746 mn)

Asia/Pacific Latin America Construction 18.7% (CHF 1,040 mn) 11.5% (CHF 639 mn) 80.9% (CHF 4,507 mn)

Sika Annual Report 2014 Facts & Figures 4 Letter to Shareholders CONTINUED HIGH GROWTH MOMENTUM RECORD SALES IN ALL REGIONS

Dr. Paul Hälg, Chairman of the Board Jan Jenisch, Chief Executive Officer

Sika Annual Report 2014 Letter to Shareholders 5 the sika success story continued in 2014 persistently. the the 873 Sika employees working in product development are implementation of the strategy 2018 is well under way. sales the drivers of our innovative strength. in the 2014 fi nancial year, reached record levels in all regions and all relevant growth tar- 70 new patent applications were fi led, and a large number of gets for 2014 were exceeded. high growth momentum and dis- new products were launched in all target markets. ciplined cost management led to record fi gures of chF 633.2 million (+21.0%) for the operating result and chF 441.2 million ensurIng that the sIka success story contInues (+28.0%) for net profi t. on December 8, 2014, Sika stated its position on the potential change of control to Saint-Gobain, and shortly afterwards pre- We exceeded our growth targets for full-year 2014 signifi cantly, sented concrete proposals for ensuring that the Sika success and sales increased by 13% (at constant exchange rates) to cHF story continues. the majority of the board of Directors and the 5.57 billion. all regions contributed to this growth and set new entire Group management reject the change of control in the sales records. the negative currency eff ect for the full year was currently proposed form. However, they will continue to act in 4.7%. Sales in Swiss francs increased by 8.3% after adjustment the interests of Sika and its stakeholders, and this includes for currency eff ects. holding constructive talks with all the parties involved. the goal is to continue to move Sika’s successful growth strategy for- the high growth momentum translated into an above-average ward unimpeded. increase in the operating result and net profi t. our focus on the gross margin is producing outstanding results and we persisted Board oF dIrectors, dIvIdend proposaLs to the with our disciplined approach to cost management. ebit of cHF annuaL generaL meetIng 633.2 million (+ 21.0%) and net profi t of cHF 441.2 (+ 28.0%) at the annual General meeting, the board of Directors will pro- represented new record levels. operating free cash fl ow was pose to the shareholders an increase in the dividend to cHF again over cHF 400 million. 72.00 per bearer share (2013: cHF 57.00, +26%) and cHF 12.00 per registered share (2013: cHF 9.50, +26%). successFuL ImpLementatIon oF strategy 2018 our Strategy 2018 is delivering results in excess of our targets our record year in 2014 is the result of the expertise and com- and expectations. its pillars are the accelerated development of mitment of our 16,895 employees. their energy and ideas have growth markets, investments in new factories and the launch taken Sika to the next level of performance. We would like to of new products. the Strategy 2018 is implemented by profi t- thank all of them for their hard work and loyalty over the past oriented employees who are ready to take responsibility and year. whose main priority is the customer. many thanks also go to our customers, business partners and 8 new FactorIes and 70 new patents suppliers for their outstanding cooperation and the trust they accelerated development and expansion in the emerging mar- have placed in us. a special vote of thanks goes to our share- kets continued in 2014. new factories were opened in brazil, holders for their loyalty. mexico, indonesia, Singapore, india and Serbia. the founding of six new international subsidiaries in Sri lanka, bosnia-Herze- govina, albania, mozambique, ivory coast and nigeria has cre- Sincerely, ated a basis for tapping these new markets. in the uS, two new production facilities were commissioned in atlanta and Denver. industrial and infrastructural construction is trending up. motivated by our assumption that Sika will profi t from medium to long-term growth potential, we are investing DR. paul HälG Jan JeniScH in the further expansion of our production facilities in the uS. chairman of the board chief executive offi cer

Sika annual RepoRt 2014 letter to Shareholders 6 Customer Focus We build trust

“Customer First” is a cornerstone of the Sika values and principles and addresses the key question: What can we do to offer our customers maximum benefit anytime? The answer is given every day by Sika employees themselves. Through their personal commitment, their expertise and by an innovative portfolio of products and solutions. Exceeding excpectations. That’s what moti- vates Sika staff. Listening, understanding, being able to look ahead and to anticipate: That’s what Sika’s staff personify, to innovate, that’s what excites them. Personal commitment worldwide. How and why Sika’s employees give their utmost for their customers: 36 personalities from all continents provide an insight.

Sika Annual Report 2014 Customer Focus 7 We develop products based on our customers’ requirements, delivering high- quality products to match their expectations • Nina Akhata R&D and Quality Manager, Indonesia

Every day we work directly with our customers, and no matter how big or small they are we strive to offer them the best technical service, foreseeing their needs, proposing solutions, building trust. • Santiago Vidart Head Technical Service, Uruguay

In 2014 I was responsible for two major projects – the construction of a new warehouse and the introduction of SAP. My job is to help our customers deliver It was my goal to set up the best pos- the very best results for their customers. sible supply chain and customer service • Chris Harnett Equipment Engineer, New Zealand for all our customers. • Wendy Geers Operations Manager, Belgium

Sika Annual Report 2014 Customer Focus 8 I cherish Sika from the bottom of my heart, for me it feels like my second home and family. By working hard I hope to help build en- during trust between us and our customers. • Elkaboune Abdelfattah Warehouse Worker, Morocco

As a long-term employee of Sika, my personal target is to offer customer-oriented solutions at any time. A well-rehearsed team with expert knowledge is the foundation for achieving that. • Jules Vogt (right) Target Market Manager, Concrete and Waterproofing, Switzerland Franz Bütler (Left) Marti Bauunternehmung AG

My customers are mainly on the building site, and I enjoy chatting with craftsmen as we can learn from each other. This helps me better understand how they handle problems on site and what solutions I can provide. • Thomas Mayer Refurbishment advisor, Austria

Sika Annual Report 2014 Customer Focus 9 I always listen to customers and empa- thize with their problems so that I can give them the best solution. They expect us to offer a comprehensive service and respond with urgency to their issues – the aim is to always meet those expectations.

• Nancy Soto Head Business Development Waterproofing, Chile

Creating innovative products for our customers inspires and engages me. • Luigi Perrino R&D Manager, Italy

Every day, I work with customers to provide guidance, experience, and knowledge – shared from early design stages through manufacturing launch – to merit customer Logistics plays a key role in meet- confidence that Sika and its prod- ing our customers’ satisfaction. The ucts will exceed their expectations. faster we deliver, the closer Sika will • Scott Glaza be with the customer. Senior Product Engineer, USA • Liu Xingwei (left), Liang Yu (right) Warehouse Workers, China

Sika Annual Report 2014 Customer Focus 10 In difficult situationsI try to show empathy and flexibility, and en- gage with our customers so that they can recognize our Sika Spirit. • Silke Köhler Customer support, Austria

Our goal in Uruguay is to make sure customers think I maintain a work environment of Sika when they need a that is safe, clean and organized solution for their project. and focused on producing parts that exceed the customers’ expec- • Mario Delmonte Distribution Sales tations. Without doubt, provid- Representative, Uruguay ing quality products on time day after day is a key criteria to earn I have been managing customer trust and building a the customer service long-term relationship. team at Sika France since • Dana Tran Production Manager, USA 1990, handling 140,000 orders a year. We constantly have very short deadlines and being the interface between the clients, the factories, and our sales teams gives us a real adrenalin kick. Client satisfaction is the driving force for the whole team, every day.

• Corinne Delamare Customer Service Manager, France

Sika Annual Report 2014 Customer Focus 11 I strongly believe that each one of our employees contributes directly to Sika’s growth and success, therefore I aim to recruit, develop and retain a highly competent and diverse workforce who not only support the mission and values of Sika, but who will also offer the highest levels of customer satisfaction. • Ali Hakami HR Services & Government Relations Manager, Saudi Arabia

We have attained a very strong market position, which has been achieved by building a trusting relationship with our clients, by offering permanent technical support, a personal- ized service, and a product range that meets their technical requirements. • Joaquin Garrett Castedo Target Market Manager Concrete, Bolivia

We are the eyes and ears for our customers within Sika, and our aim is to ensure our developments and As a technical service engineer I am always proud products help them to achieve their to receive a big thumbs-up from our customers. goals and requirements. • Richard Li (left) • Marcus Ohk Regional Technical Service Manager Concrete North China, China Sales Director Volkswagen Group Europe, Zhao Zheng (right) Germany CEMEX (Tianjin) Co. LTD.

Sika Annual Report 2014 Customer Focus 12 In our plant located 1,450 kilome- ters from Santiago, in the Ata cama Desert, we are focused on manufacture and supply quality products to provide our customers with the highest industrial standards. • Rene Casado Plant Manager Antofagasta, Chile

Through listening and understanding the needs and values of our customers Sika builds trust and partnerships that last.

• Lee Sleight Key Project Manager, UK

Sika means trust and quality for our customers. We are aware of this responsibility and construct our relationships in this manner.

• Suzan Yamaç Product Engineer Flooring, Turkey

I try to really listen. ALL customers, internal and external, want to know they are really being heard. I try to put myself in their position. I think it helps to build a thoughtful, responsible and positive relationship. By putting in a little extra time and effort, I encourage the idea that I can be depended on. • Jenny Cook Laboratory Team Leader, USA

Sika Annual Report 2014 Customer Focus 13 My daily work often takes me to dirty places, as well as up high or down deep to help solve customers’ problems. • Herman Van Rensburg (left) Area Sales Manager, Free State and Northern Cape, South Africa Juane Muller (Right) SA Rope Access

We build a strong construction chemicals company which serves the market with multiple solutions, not only for flooring but also for refurbishment, waterproofing and roofing. We always try to sur- • Wiljan Mossing Holsteyn pass the expectations Sales manager of the North of the Netherlands, Netherlands of all our internal and external customers. With commitment we communicate the Sika brand as a differenti- ating attribute, which delivers more added value in the long term. • Gonçalo Carvalho Director of Marketing, Portugal

The personal success of my customers, achieved due to my consulting service, is my daily motivation. • Reto Boltshauser Consultant for Planners and Owners, Switzerland

Sika Annual Report 2014 Customer Focus 14 The small steps we walk with customers are a giant step for building trust.

• Mark Ho Market field sales engineer – Target Market Refurbishment, Hong Kong

In flooring, innovation and sustainability are key. We have to move fast to keep our position as number one for our customers. With innovation and qual- • Jimmy Kahl Head Target Market Flooring, Denmark ity we contribute perma- nently to the differen- tiation of our products in the market, meeting the needs and expectations of our customers. • Solana Díaz Head Quality and R&D Laboratory, Uruguay

We help to develop our customers’ businesses by providing them with value-added products and specified solutions for projects. • Yoshiharu Miura General Manager, Dyflex, Japan

A company can only thrive for over 100 years by em- bracing innovation and development and using them to meet the needs of an increasingly demanding market. Having worked for Sika for 43 years, I have the utmost respect for our customers, and I dedicate each day to increasing their confidence in us. • Raul Duarte Construction Sales Representative, Portugal

Sika Annual Report 2014 Customer Focus 15 Being with my customers before, during and after their jobsite is the key to providing added value to our products. With our help and support, my partners know they can count on me and on Sika. -• Marie Claude Girard (left) Technical Sales Representative Flooring, Canada Samuel Buteau (right) BGLA Architects A prompt reply is key in customer service. There will always be difficulties or problems, but it is the solutions we provide which help us gain and keep customers.

• Paul Carlin Customer Service Assistant, Peru

Our main focus in sales is to create reli- ability and consistency in our relationships with our customers, in combination My work is made easier because of the fact that with the delivery of innovative solutions. everyone, from the first to the last employee in Sika • Daniela Schmiedle Slovenia, understands the importance of taking care Head of Sales – Flooring and Waterproofing, of customer relationships. Germany • Mojca Erjavec Marketing & Environment, Health and Safety (EHS), Slovenia

Sika Annual Report 2014 Customer Focus 16 Investment in Sika

Sika Annual Report 2014 Customer Focus 17 Stock Price Development Solid results boost Sika share up to December

Share markets trend positively in the report year. Solid results provide added impetus for the Sika share. The share’s upward momentum was brought to an abrupt end when the hostile takeover bid mounted by Saint-Gobain on December 8 became public.

Sika versus SMI Sika Bearer Share 1/1/2014–12/31/2014 SMI

120%

110%

100%

90%

1.14 2.14 3.14 4.14 5.14 6.14 7.14 8.14 9.14 10.14 11.14 12.14

Overview Stock exchange ratios Sika

́́Sika’s solid achievements and results were reflected in the 2014 share price until December 8. Market capitalization in CHF mn 7,458 ́́Closing price of the Sika share in 2013: CHF 3,171, Yearly high 3,886 Closing price of the Sika share in 2014: CHF 2,936, Yearly low 2,750 corresponding to a performance of -7.4%. Year end 2,936 ́́The key global share indices performed as follows: Dividend 2013 57.00 –S– MI +10% Dividend 20141 72.00 –D– AX +3% Earnings per share (EPS) 173.19 –– Dow Jones +8% –– Nikkei +10% 1 Pursuant to proposal to Annual General Meeting

Sika Annual Report 2014 Stock Price Development 18 Risk Management Early identification of possible risks

As a global player, Sika is exposed to a variety Supplier management and raw of risks. Ensuring the Group’s freedom of ac- material procurement tion at all times, safeguarding its image, and The raw materials that Sika processes into superior-grade prod- protecting the capital invested in Sika neces- ucts are the Group’s biggest cost factor. This is why they are sitates a timely analysis of potential risks and high on the risk assessment agenda. Almost 70% of the materi- their integration into strategic decision-making als used by Sika in production – e.g. polyols, epoxy resins, acrylic processes. dispersions, or polycarboxylates – are based on crude oil or crude oil derivatives. Purchase prices consequently vary according to the respective supply and demand situation of each raw material and the volatility in the price of oil. To reduce dependency on Risks and opportunities crude oil, Sika is increasingly relying on renewable raw materials such as sugar derivatives, bioethanol derivatives, or ricinus oils. Flawed risk assessments may seriously impair a company’s Mineral substances, sand and cement make up the remaining reputation, limit its freedom of action or, at worst, lead to insol- raw materials. vency. Well aware of this, Sika reacted years ago by introducing a comprehensive risk management system at Group level and Sika’s purchasing processes for base chemicals follow strict for all of its subsidiaries. Risks should be identified at an early quality requirements from certified suppliers offering the best stage and integrated into strategic decision-making processes. value for money. In the case of key raw materials with limited Risk management may sometimes assist in the identification availability, or large purchase volumes, Sika mandates at least of new opportunities and thereby help to generate added value. two suppliers whenever possible. The Group tries to manufacture the raw materials for unique, highly innovative technologies in-house. In respect of all the materials used, compliance with Group Management and Board of the relevant statutory registration requirements (e.g. REACH or Directors TSCA) is monitored and ensured by a network of global and local specialists, as well as external consultants. Whereas Sika’s Group Management regularly reviews the processes underlying risk management, the Board of Directors Sika’s procurement specialists and technical experts cooperate bears ultimate responsibility for risk assessment. Its duties in- closely with the suppliers, technical units to be able to fully un- clude annual reassessment of the risk situation at Group level. derstand the raw material flows and continually optimize costs, All risks are assessed in terms of a few basic questions: quality, availability and sustainability. –– Is the risk global or regional in scope? –– How significant is the risk for the Group? Potential suppliers are closely screened by Sika. Before working –– How high is the probability of losses occurring? with the company, they are required to sign the Supplier Code of –– What measures need to be implemented to prevent the risk Conduct, which covers all principles of sustainability. or to mitigate its consequences? All suppliers are regularly evaluated by Sika. The corresponding Effective measures are then taken to counteract any risks that findings are incorporated into the risk assessment, along with are rated critical in the overall assessment. the suppliers, self-appraisals and data available in the public do- main. If a relevant risk is identified, Sika will conduct an audit of Sika pursues a risk-based management approach along the en- the supply company in question to ensure the functionality of tire value chain from procurement and production to marketing. the latter’s internal risk management system. With a particular focus on local suppliers, potential risks will be systematically identified and addressed accordingly.

Sika Annual Report 2014 Risk Management 19 Production and logistics Customers and markets

Sika sets defined standards for risk provisions that are binding Sika has a policy of strategic diversification to limit market- and for its production and logistics operations. These standards form customer-related risks. Geographical diversification is tremen- part of the Group-wide “Sika Corporate Management System” dously important in the locally based construction industry given and determine, for example, the processes and guidelines in the the sometimes contrary business trends witnessed in this sector areas of purchasing, quality, environment, health and safety. They in the different regions of the world. Customer diversification – are also displayed together with the statutory regulations in the with no single customer accounting for more than 1.5% of Sika’s management systems of the local Sika companies. Additionally, turnover – is another stabilizing factor. As a further safeguard all Sika production companies are certified to IND EN ISO 14001 against economic fluctuations, Sika operates both in the new- (environmental protection) and 9001 (quality), and many also to build sector and in the less cyclical renovation and maintenance OHSAS 18001 (safety and health). A growing number of larger fa- market. cilities are also certified to ISO 50001 (energy management). The current certification status of the individual Group companies is shown on page 114 ff. of the download version of this report. Financial risks

Audits and inspections are core elements of the comprehensive The purpose of financial risk management is to optimize fund- management system. They provide management at Group, re- ing and achieve a liquidity position geared to payment of obliga- gional and local company level with a regular, independent as- tions. Liquidity is ensured by means of long-term bonds: sessment of compliance with official requirements as well as with Sika’s internal risk management guidelines and principles. Liquidity is optimized by means of a cash pooling arrangement. The audits and inspections ensure the effectiveness of the pro- Sika also manages its net working capital with the utmost pru- cesses and the related controls. Quality, environment, safety and dence. For example, the local companies have precisely defined risk factors, technology, legal matters, IT security, suppliers and processes for handling accounts receivable. A cost structure products are all subject to audit. Group-wide, Sika conducted a dovetailed to the prevailing market conditions ensures ade- total of 117 audits in 2014. quate cash generation. Sika attaches high priority to open and cost-efficient access to capital markets. Of significance here is Sika also regularly audits production and logistics at the local the Standard & Poor’s rating A-/stable (long-term). companies. This includes recording the risks that may result in production downtimes, personal injury, property damage or liability claims. The probability and implications of the risks are as- Internal Audit sessed and measures are subsequently defined and implemented to minimize the risk potential at the site, and to enhance safety. Internal Audit carries out inspections as set out in the annual Sika is also insured against production losses. audit plan. The audits primarily include inspections of Group companies in the areas of product development, purchasing, While Sika has seen a significant reduction in the number of ac- production, financial and operational reporting, sales, payroll cidents over the past three years, there is still further scope for processes, accounts receivable and accounts payable manage- improvement as regards accident prevention, which is why the ment, and IT management. In addition to the global audit of company is stepping up efforts in this area. sales and production companies, regular in-depth audits are carried out in the area of headquarters functions or Group-wide support processes. Internal Audit is an instrument of the Board Product development and marketing of Directors and reports to the Audit Committee.

For products and services, Sika has a set product development Financial risk management is described in greater detail on page process that factors in potential risks. As well as monitoring 104 ff. of the download version of this report. ecological and safety aspects during the development, production and product handling stages, Sika also focuses on market opportunities and risks, product sustainability performance, and the protection of intellectual property.

Over a period of many years, Sika has had a global program in place to minimize the risks in advisory and sales activities that could provide grounds for product complaints. Thanks to a host of additional measures, including the regular training of employees, clearly formulated standards, detailed causal analyses, and stricter controls, expenditure for product-related claims is steadily being reduced. To avoid the risk of customers using Sika’s products incorrectly, Sika provides systematic instruction, application training and support to customers, as well as extensive documentation and quality control.

Sika Annual Report 2014 Risk Management 20 Leadership

Sika Annual Report 2014 Risk Management 21 Organization & Leadership Focusing on the customer

Sika’s organizational structure is decentralized, The regional and national management teams bear full profit with the management teams in the regions and loss responsibility, and – based on the Group strategy – set and national subsidiaries playing a pivotal country-specific growth and sustainability targets, and allocate resources. A detailed synopsis of the regions for the 2014 finan- role. The company is customer-focused and is cial year can be found on page 44 of the download version of characterized by its traditional flat leadership this report. structures. Sika’s regional breakdown is based on unified economic areas and supply chain structures. Overarching leadership responsi- Organizational structure bility ensures integrated management from production to the customer. Sika’s internal sales organization is geared to seven Since embarking on its international expansion, Sika has con- target markets: Concrete, Waterproofing, Roofing, Flooring, ducted its global operations through national subsidiaries. Sealing & Bonding, Refurbishment and Industry. This market- These units were later consolidated into regions with higher- oriented distribution enables Sika to sharpen its customer fo- level management functions. The heads of the regions are cus, optimize its technical market support activities and concen- members of Group Management. trate its R&D operations on market needs.

Sika Annual Report 2014 Organization & Leadership 22 Group Management

Sika’s Group Management is made up of nine personalities, whose diverse careers led them to Sika companies across the globe. The picture was taken on the occasion of a management meeting in the Acoustics & Reinforcement laboratory Widen, Switzerland.

From left to right

Silvio Ponti Adrian Widmer Ernesto Schümperli Jan Jenisch Paul Schuler Building Systems & Industry, CFO Concrete & Waterproofing CEO EMEA Deputy CEO With Sika for 8 years in With Sika for 28 years in With Sika for 19 years in With Sika for 27 years in With Sika for 31 years in Switzerland Colombia and Switzerland Switzerland, Germany and Asia Switzerland, Germany and Switzerland and the Netherlands the USA

Thomas Hasler José Luis Vázquez Heinz Gisel Christoph Ganz Technology (CTO) Latin America Asia/Pacific North America With Sika for 26 years With Sika for 31 years in With Sika for 24 years With Sika for 19 years in in the USA and Spain and Latin America in Switzerland, USA, Switzerland, France and Switzerland Austria and Asia the USA

Sika Annual Report 2014 Group Management 23 Group Management

Jan Jenisch, lic. rer. pol. Christoph Ganz, lic. oec. HSG CEO Regional Manager North America

Nationality: German; Year of birth: 1966 Nationality: Swiss; Year of birth: 1969 Member of Group Management since 2004; since 2012: CEO; Member of Group Management since 2007; since 2013: Regional 2007–2011: Regional Manager Asia/Pacific; 2004–2006: Head Manager North America; General Manager Sika USA; 2007– of Industry Division; 1998–2004: Head Automotive Europe; 2012: Head of Corporate Business Unit Distribution; 2009–2012: General Manager Sika Tivoli GmbH, Germany; Managing Director General Manager Sika France; Area Manager France, North Af- Sika Automotive Belgium SA; Director Hayashi Sika Automotive rica, Mauritius; 2003–2006: Head of Business Unit Distribution; Ltd., Japan; 1996–1997: Market Development Manager, Industry 1999–2003: Corporate Market Field Manager Distribution; 1996– Division. 1999: Project Manager Distribution, Sika Switzerland.

Silvio Ponti, Dipl. Bau-Ing. ETH, MBA Heinz Gisel, Executive MBA Head Building Systems & Industry, Deputy CEO Regional Manager Asia/Pacific

Nationality: Swiss; Year of birth: 1953 Nationality: Swiss; Year of birth: 1965 Member of Group Management since 2002; since 2005: Deputy Member of Group Management since 2012; since 2012: Regional CEO; since 2013: Head Building Systems & Industry; 2002–2012: Manager Asia/Pacific;2009–2011: General Manager Greater Chi- Regional Manager Europe North; 1989–2002: Head of Market- na, Sika China; 2007–2009: General Manager Singapore; Head ing; General Manager Sika Switzerland; Area Manager Central of Business Unit Industry Region Asia/Pacific; Area Manager Europe; 1987–1988: Head of Marketing for the Joint Venture Southeast Asia; 2004–2006: Head Appliances & Components; Hilti-Ciba-Geigy, Hilti AG, Principality of Liechtenstein; 1984– Head Transportation, Industry Division; 1999–2004: Industry 1987: General Manager Sika Netherlands; 1982–1983: Assistant Manager Sika Switzerland and Sika Austria; 1996–1998: Indus- to the Head of Export, Sika Switzerland; 1978–1980: Project try Sales Manager Sika China and Sika Hong Kong; 1995–1996: Leader, Dr. Staudacher & Siegenthaler AG, Switzerland. Area Sales Manager Industry, Sika USA; 1991–1994: Area Sales Manager, Sika Switzerland.

Thomas Hasler, Dipl. Ing. Chem. HTL, Executive MBA Technology (CTO)

Nationality: Swiss; Year of birth: 1965 Member of Group Management since 2014; since 2014: CTO; 2011–2013: Head Global Automotive; 2008–2010: Senior Vice President of Industry and Automotive, Sika USA; 2005–2008: Senior Vice President Automotive North America, Sika USA; 2004–2005: Automotive Manager Europe; 2000–2003: Auto- motive Manager Switzerland; 1995–2000: Business Develop- ment Manager; 1992–1995: R&D Head Automotive OEM Adhe- sives; 1989–1992: Research Chemist Industry Adhesives.

Sika Annual Report 2014 Group Management 24 Paul Schuler, MBA José Luis Vázquez, Dr. Ing., MBA Regional Manager EMEA Regional Manager Latin America

Nationality: Swiss; Year of birth: 1955 Nationality: Spanish; Year of birth: 1947 Member of Group Management since 2007; since 2013: Regional Member of Group Management since 2002; since 2009: Re- Manager EMEA; 2007–2012: Regional Manager North America; gional Manager Latin America; 2002–2008: Regional Manager General Manager Sika USA; 2003–2006: General Manager Sika Europe South; 1984–2002: Head of Marketing; General Man- Germany; 1988–2002: Sika Product Manager, Head of Sales In- ager Spain; 1999: Area Manager Southern Europe; 1983–1984: dustry; Marketing Manager Industry; Business Unit Leader In- Manager National Sport Insurance Company, Sport Ministry, dustry; 1982–1988: International Key Account Sales Manager Cabinet of Ministers, Spain; 1977–1983: Vice President, Oil Busi- Switzerland, EMS Chemie AG, Switzerland; 1980–1982: Project ness Division, Explosivos Rio Tinto, Spain; 1972–1976: director of Manager Air Condition Plants, Luwa AG, Hong Kong, China; numerous global projects in the area of road construction, har- 1976–1980: Production Manager, Hemair AG, Switzerland. bors, factories; Helma (Cádiz), Boskalis (Cádiz), Laing (Valencia/ Bilbao), Caminos y Puertos (Barcelona); 1970–1972: Laboratoire Central des Ponts et Chaussées, France; Instituto Eduardo Tor- Ernesto Schümperli, Dipl. Bau-Ing. ETH, MBA roja, Spain. Head Concrete & Waterproofing

Nationality: Swiss; Year of birth: 1955 Adrian Widmer, lic. oec. publ. Member of Group Management since 2007; since 2013: Head Chief Financial Officer (CFO) Concrete & Waterproofing; 2007–2012: HeadC orporate Business Unit Concrete; 1991–2006: General Manager Sika Switzerland; Nationality: Swiss; Year of birth: 1968 Area Manager Central Europe; Head of Sika Tunneling & Min- Member of Group Management since 2014; since 2014: CFO; ing; Head of Sales Switzerland; Head of Marketing Construction; 2007–2014: Head Group Controlling and M&A; 2005–2007: Gen- Market Development Manager Concrete Sika Switzerland; 1987– eral Manager Construction Systems Germany/Austria/Swit- 1990: Head of Marketing Sika Colombia; Key Account Manager zerland, BASF (Degussa) Construction Chemicals, Switzerland; Latin America; 1986–1987: Project Manager Structural Engineer- 2000–2005: CFO Degussa Construction Chemicals Switzerland; ing, Wenaweser & Wolfensberger AG, Switzerland; 1976–1985: Finance Director Business Line Flooring Europe; Manager Cor- University and postgraduate studies, Research Engineer at ETH porate Finance, Degussa Construction Chemicals, Switzerland; Zurich and UAS Basel, Switzerland; 1971–1975: Project Manager 1997–2000: Manager M&A, Textron Industrial Products, United Infrastructure, Frey + Gnehm AG, Switzerland. Kingdom/Switzerland; 1995–1997: Market Development Man- ager, Textron Inc., USA/United Kingdom; 1994–1995: Business Analyst, Nordostschweizer Kraftwerke (NOK), Switzerland.

Sika Annual Report 2014 Group Management 25 Organizational Diagram Integrated management, flat hierarchies

We take the long view when it comes to developing our business. Our relationship with customers, stakeholders and employees is shaped by respect and responsibility. Sika operates with a strong focus on safety, quality, environmental protection, fair treatment, social responsibility, responsible growth, and value creation.

Board of Directors Urs F. Burkard Willi K. Leimer Daniel J. Sauter Christoph Tobler Paul Hälg, Chairman Frits van Dijk Monika Ribar Ulrich W. Suter Jürgen Tinggren

CEO

Jan Jenisch

CFO Technology

Adrian Widmer Thomas Hasler

Building Systems & Industry Concrete & Waterproofing

Silvio Ponti, Deputy CEO Ernesto Schümperli

EMEA Asia/Pacific North america Latin america

Paul Schuler Heinz Gisel Christoph Ganz José Luis Vázquez

Sika Annual Report 2014 Organizational Diagram 26 Board of Directors

Paul Hälg, Dr. sc. techn., ETH Zurich Frits van Dijk, School of Economics (HES), Rotterdam Chairman Chairman Nomination and Compensation Committee

Nationality: Swiss; Year of birth: 1954 Nationality: Dutch; Year of birth: 1947 Member since: 2009; since 2004: CEO, Dätwyler Group, Altdorf; Member since: 2012; Committees: Chairman Nomination and 2001–2004: Executive Vice President, Forbo International SA, Compensation Committee; 1970–2011: Career within Nestlé (fo- Eglisau; 1987–2001: Product Manager, Commercial Director, CEO, cus region Asia), of which the last 10 years as member of the Gurit Essex AG, Freienbach; 1981–1986: Project and Group Lead- Nestlé SA Executive Board, responsible for Asia, Oceania, Africa er, Schweizerische Aluminium AG (Alusuisse), Zurich; Member and Middle East; Member of the Board: Nestlé Malaysia Berhad. of the Board: Datwyler Cabling Solutions AG, Altdorf; Chairman: Welfare Foundation Sika, Baar; Welfare Fund Datwyler Holding AG, Altdorf. Urs F. Burkard, Carpenter/Interior Designer

Nationality: Swiss; Year of birth: 1957 Willi K. Leimer, Dr. oec. HSG Member since: 1990; Committees: Nomination and Compen- sation Committee; since 1989: Principal, Burkard Office Design Nationality: Swiss; Year of birth: 1958 GmbH, Rotkreuz; 1987–1989: Head of planning, Denz Office Member since: 2010; Committees: Audit Committee; since 2007 Furniture, Zurich; Chairman of the Board: Unitrend Burkard AG, Chairman of the Board (until December 9, 2014): Schenker- Rotkreuz; Vice Chairman of the Board: Schenker-Winkler Hold- Winkler Holding AG, Baar; since 2002 Partner and Member of ing AG, Baar; Member of the Board: Gazet Holding AG, Baar. the Board: WMPartners Wealth Management Ltd., Zurich; since 2003 Partner and Chairman of the Board: ISPartners Investment Solutions AG, Zurich; 1990–2002: Managing Director: Private Monika Ribar, lic. oec. HSG Wealth Management, Bank Morgan Stanley AG, Zurich; 1988– Chairman Audit Committee 1990: Goldman Sachs & Co., New York and Zurich. Nationality: Swiss; Year of birth: 1959 Member since: 2011; Committees: Chairman Audit Committee; Daniel J. Sauter, Financial Expert 2006–2013: CEO, Panalpina AG, Basel; 2005–2006: CFO, Panal- pina AG, Basel; 2000– 2005: Chief Information Officer (CIO), Pa- Nationality: Swiss; Year of birth: 1957 nalpina AG, Basel; 1991–2000: various functions within Control- Member since: 2000; Committees: Nomination and Compen- ling, IT and Global Project Management, Panalpina AG, Basel; sation Committee; 1994–2001: CEO and Delegate of Board of Vice Chairman of the Board: SBB AG (Swiss Federal Railways), Directors, Xstrata AG, Zug; 1983–1998: Senior partner and CFO, Bern; Member of the Board: Lufthansa Group, Frankfurt/Main; Glencore International AG, Baar; 1976–1983: Various banks, incl. Logitech International SA, Romanel-sur-Morges; Swiss Inter- Bank Leu, Zurich; Chairman of the Board: Julius Bär Gruppe AG, national Airlines Ltd., Zurich; Rexel SA, Paris; Chain IQ Group, Zurich; Trinsic AG, Zug; Tabulum AG, Zug; Hadimec AG, Mägenwil. Zurich.

Sika Annual Report 2014 Board of Directors 27 Christoph Tobler, Dipl. El. Ing. EPFL Ulrich W. Suter, Dr. sc. techn., Professor

Nationality: Swiss; Year of birth: 1957 Nationality: Swiss; Year of birth: 1944 Member since: 2005; Committees: Audit Committee; since Member since: 2003; 2001–2005: Vice President Research, ETH 2004: CEO, Sefar Holding AG, Thal SG; 1998–2004: Head of In- Zurich; 1988–2008: Professor, ETH Zurich, Department of Mate- dustry Division and Member of Group Management, Sika AG, rial Science; 1982–1989: Professor, MIT, Department of Chemical Baar; 1994–1998: Adtranz Schweiz; 1988–1994: McKinsey & Engineering, Cambridge, USA; Chairman of the Board: WICOR Company, Zurich; Chairman of the Board: AG Cilander, Herisau; Holding AG, Rapperswil SG; Member of the Board: Global Sur- Member of the Board: Sefar Holding AG, Thal SG; Member of face AG, Nussbaumen TG; Rainbow Photonics AG, Zurich; Presi- Board Committee: economiesuisse, Zurich; Member of Regional dent of the Foundation Council: Werner Oechslin Library Foun- Advisory Board: Swiss National Bank. dation; Member of the Board of Trustees: Pension Fund of the Weidmann Group of Companies; Swisscontact. Consultant to the Head National Research Foundation, Singapore. jürgen tinggren, MBA Vice Chairman

Nationality: Swedish; Year of birth: 1958 Member since: 2014; 2011–2013: CEO, Schindler Group, Ebikon; 2007–2011: President of the Schindler Group Executive Commit- tee; 1997–2007: Member of the Schindler Group Executive Com- mittee; 1985–1997: Sika AG, Baar. Final position: Member of the Management Committee with responsibility for North America; Member of the Board: Schenker-Winkler Holding AG, Baar (until December 9, 2014); Schindler Holding Ltd., Ebikon; Tyco Interna- tional Ltd., Dublin; The Conference Board, New York.

Sika Annual Report 2014 Board of Directors 28 Strategy & Focus

Sika Annual Report 2014 Board of Directors 29 Strategy Active in attractive growth markets

The Sika Growth Model ensures the long-term Values and Principles success and the profitable growth of our company. Founded in Switzerland by visionary inventor Kaspar Winkler over 100 years ago, Sika has developed into a successful global company with a leading position in the development and production of systems and products for bonding, sealing, damping, Building Trust – Sika’s Strategy 2018 reinforcing and protecting in the building sector and the motor vehicle industry. The Sika Growth Model ensures the long-term success and the profitable growth of our company. The future success of Sika is not only dependent on pursuing We aim for global market leadership in our 7 target markets the right strategy, but is just as much based on the trust and through cross selling, life-cycle management and the strength- dedication of all employees. The journey to global leadership is ening of our brand. The core of our business is our innovation founded on the entrepreneurial philosophy and the Sika Spirit. management and our focus on developing quality products The Sika Spirit is synonymous with the strong set of values and and the best solutions for our customers. principles that make up the DNA of the company. We accelerate the buildup of our organizations in the emerging markets and further expand our supply chain footprint. 1. Customer First Acquisitions will enable us to leverage our market access and to 2. Courage for Innovation strengthen our economies of scale. 3. S ustainability & Integrity Our Sika Spirit – which is defined in Sika’s Values & Prin- 4. E mpowerment & Respect ciples – is the foundation of our future success. We act with 5. M anage for results respect and responsibility towards our customers, our shareholders and our employees, which is reflected in our Sika brand promise “Building Trust.”

6–8% Market Penetration Growth per year

42–45% Innovation of sales in Emerging Markets

>10% Emerging Markets Operating Profit

>6% Acquisitions Operating Free Cashflow

>20% Values Return on Capital Employed

Sika Annual Report 2014 Strategy 30 The Sika Brand The Sika brand stands for quality, innovation and Service

Sika is a strong brand. It allows the Group to Building Trust present a uniform identity in all target markets Since 2013, Sika has successfully integrated the new tagline, and with all products. “Building Trust,” into its communication strategy. The implications of this pledge for Sika’s brand positioning can be described as follows: Sika as a brand “Specialty chemicals are our business and trust is the bedrock of the sector we operate in. We have concentrated on the quality Branding lends products a distinct identity and associates them of our products for over a century, during which time our spirit with a specific set of values. This fact was recognized early in of ingenuity has inspired the entire industry. We are commit- Sika’s history by founder Kaspar Winkler, who coined the com- ted to delivering innovative, reliable and durable solutions for pany’s name and designed its logo. The considerable standing our customers in both the construction and manufacturing sec- acquired by the Sika brand over the years is a tribute to this far- tors. This commitment reflects the values and standards that sightedness. Having changed only slightly since its creation, the are Sika’s hallmark across all its core competencies of bonding, logo epitomizes continuity and solidity. It is recognized across sealing, damping, reinforcing and protecting. We are willing and the globe as synonymous with innovation, quality and service. able to meet all the future challenges facing our customers and The combined word/picture trademark has proved a valuable as- partners. We offer innovative products, comprehensive services, set throughout the world during the Sika Group’s decades-long expert advice, sound training and application-specific solutions. expansion. Both the word “Sika” and the logo, with its famil- We pride ourselves on our achievements and are always keen iar red and yellow hues, are readily accepted across all cultural to demonstrate our capabilities. Sika is ‘a quality label’ you can boundaries. rely on. –– Committed to supreme performance. Worldwide trademark protection –– Inspired by innovation. Given the high awareness of the Sika brand, particularly the –– Building Trust.” graphic trademark, the company attaches high priority to a consistent and standardized use of the logo, and verifies compli- The second core element of the Sika brand, alongside its po- ance with the associated corporate image guidelines. Custom- sitioning, is the brand personality. Three attributes form the ers throughout the world can rest assured that they will receive backbone of this personality: pioneering, team-oriented and Sika quality and service wherever they see the Sika logo. The committed. various attempts, in recent years, to copy the logo only serve to underline its enormous intangible value for the company. Turn to page 7 ff. to read how Sika’s employees honor their “Building Trust” pledge every day in the service of their custom- The umbrella brand Sika together with some 830 Sika product ers. trademarks, such as Sikaflex®, Sika®ViscoCrete®, SikaBond® or SikaForce®, sharpen the company’s competitive edge. Hence the crucial role of trademark protection as a management task, performed both globally at Group level, and locally at national level. In total, Sika held 10,500 trademark registrations in 161 countries at the end of 2014. Sika AG continuously monitors its trademarks and takes consistent legal action in cases of in- fringement.

Corporate Identity The rollout of Sika’s revamped corporate identity in spring 2013 gave the company’s public face a fresh and modern look. The aim of the lengthy corporate identity process preceding this was to achieve a clear-cut positioning of the brand based on uniform corporate design guidelines. The online and offline launch of the new CI on all continents was the key focus of 2014. Sika used the enhanced brand design as the starting point for an image campaign which spells out the full significance of the “Building Trust” tagline and puts the spotlight on the target markets.

Sika Annual Report 2014 The Sika Brand 31 Customers & Markets Focus on the top position

CONCRETE ROOFING

Sika develops and markets numerous admixtures and addi- Sika provides a full range of single-ply and built-up flat roofing tives for use in concrete, cement and mortar production. These systems incorporating both flexible sheet and liquid applied products enhance specific properties of the fresh or hardened membranes. Demand in this segment is driven by the need for concrete, such as workability, watertightness, durability, or early eco-friendly, energy-saving solutions such as green roof sys- and final strength. The demand for admixtures and additives is tems, cool roofs and solar roofs, which simultaneously help to currently on the rise, particularly due to the increased perfor- reduce CO2 emissions. While refurbishment projects continue to mance requirements placed on concrete and mortar, especially gain significance in the mature markets, the emerging markets in urban areas and for infrastructure construction. Furthermore, are moving towards higher-quality roof solutions. the growing use of alternative cementitious materials in cement, mortar, and thereby also in concrete, increases the need for admixtures.

WATERPROOFING FLOORING

Sika’s solutions cover the full range of technolo¬gies used for Sika’s flooring solutions are based on synthetic resin and ce- below-ground waterproofing: flexible membrane systems, liq- mentitious systems for industrial and commercial buildings, uid applied membranes, waterproofing admixtures for mortars, for example pharmaceutical and food-sector production plants, joint sealants, waterproofing mortars, injection grouts and coat- public buildings such as educational and health care facilities, ings. Key market segments include basements, underground parking decks and private residential properties. Each market parking garages, tunnels and all types of water-retaining struc- segment is subject to its own particular requirements in terms tures (for example reservoirs, storage basins, storage tanks). of mechanical properties, safety regulations (for example slip Watertight systems are faced with more stringent requirements resistance), antistatic performance, and chemical or fire resis- regarding sustainability, easy application and total cost man- tance. Trends in the flooring market are being dictated by the agement. Therefore the selection of appropriate waterproofing growing significance of safety and environmental regulations as systems according to the needs and requirements of the owner well as customized technical requirements. The high volume of as well as the detailing of the solution are key for long-lasting building alteration and conversion projects nowadays has boost- and watertight structures. ed the importance of efficient solutions for the refurbishment of existing flooring systems.

Sika Annual Report 2014 Customers & Markets 32 SEALING & BONDING INDUSTRY

Sika’s wide-ranging portfolio includes top-class elastic sealing The markets served by Sika include automobile construction, and bonding solutions to meet all job site needs, for example the commercial vehicle industry (structural bonding, direct glaz- joint sealants for facades or resistant sealants for floor and spe- ing, acoustic systems, reinforcing systems), automotive after- cial joints as well as multipurpose bonding solutions for interior market (auto glass replacement, car body repair), renewable finishing or parquet and soft floor covering installations. The energies (solar and wind), and facade engineering (structural growing demand in this market is fueled by the sharper focus on glazing, sealing of insulating glass units). Sika technologies en- energy-efficient building envelopes, the ever greater variety of able crash-resistant bonding for enhanced car safety. The new materials used in construction, the increasing volume of high- solutions for bonding together different materials, for example rise projects and the growing significance of health, safety and aluminum and carbon fiber, pave the way for lighter, more fuel- environmental issues. efficient vehicles.M anufacturers are also seeking solutions that minimize production time and costs.

REFURBISHMENT

This segment features concrete protection and repair solutions, for example repair mortars, protective coatings, grouts and structural strengthening systems. It also includes products for interior finishing, such as leveling compounds, tile adhesives and tile grouts. Sika provides technologies for the entire life cycle of commercial buildings, residential properties and infrastructure constructions. Especially in developed markets, many structures are decades old and need to be refurbished. The present uptrend in demand is attributable to a rising volume of infrastructure rehabilitation projects in the transport, water management and energy sectors. The global urbanization trend and the increasing need for renovation in developed countries also fuel demand in the interior refurbishment sector.

Sika Annual Report 2014 Customers & Markets 33 Products & Innovations Courage for Innovation

Sika’s success and reputation is based on its Focus of development in individual long-lasting tradition of innovation. Accord- target markets ingly, the core of its business is the innovation Concrete management and the focus on developing Development activities in the concrete segment focus on op- quality products and the best solutions for the timizing the basic constituents of concrete (sand, aggregates, customers. Sika has institutionalized a Product cement) and concrete admixtures. The latter specifically include Creation Process with a strong focus on con- high-volume plasticizers, additives for cement production and sistently developing new products, systems shotcrete accelerators as well as admixtures that boost con- and solutions for bonding, sealing, damping, crete durability. reinforcing and protecting in its defined target Waterproofing markets. In this segment, Sika is concentrating its efforts on waterproofing systems for tunnels and buildings. A particular emphasis is By investing in the established technology on waterproofing systems for installation before and after con- centers and laboratories across the globe, creting as well as technologies that are tailored to the needs of Sika benefits from its worldwide network of the latest-generation tunnel-boring machines. scientists, partners and suppliers, while fulfill- Roofing ing the promise to be close to its customers In the development of its roof membrane products, Sika is fo- everywhere. cusing on low-emission liquid applied membranes and new en- vironmentally friendly, solvent-free waterproof membranes. The Sika i-Cure® technology has paved the way for the development Innovation and growth of eco-efficient liquid membranes that also offer maximum safety during on-site application. Moreover, solutions combin- Growth results from innovation, and this, in turn, depends on re- ing membranes with adhesives are opening up new, efficient search. Research and development (R&D) thus enjoy an accord- installation techniques. ingly high priority within the company. The R&D strategy adopted by Sika in recent years has yielded a high innovation rate, with nu- Flooring merous patents plus a wide range of new products. To meet constantly growing demands in terms of reliable processing and environmental compatibility in the resin flooring Core competencies market, Sika has developed the first products in a new line of One key factor for the success of Sika’s R&D work is its strate- benzyl alcohol-free epoxy floors: a new primer, a new self-leveling gic focus on clearly defined core competencies, namely bonding, flooring system and an antistatic floor. sealing, damping, reinforcing and protecting load-bearing structures in building and industry. Sealing & Bonding To generate further growth, a new range of adhesive products Sika’s sealing products are used to install durable wind-, rain- with outstanding application properties and high early strength and draft-proof barriers in flat roofs, complex tunnel systems, was developed for both professional and DIY users. In addition, damage-prone water-retaining structures and sophisticated the foundations were laid for the development of water-based curtain wall assemblies. Bonding ensures the permanent, elas- adhesives and sealants incorporating new dispersion polymers. tic or structurally continuous connection of different materials, for example in vehicles, window assemblies and even segmental Refurbishment bridges, where concrete units weighing several tons are joined Sika is capitalizing on innovative filler technologies to develop together. Damping reduces vibrations in fixed and moving ob- new high-performance mortar products with improved work- jects, thereby lowering resonance and noise emission in load- ability and a broader scope of application. By replacing cement bearing structures and in vehicle interiors. Sika’s reinforcing constituents with various aggregates, Sika has vastly enhanced solutions using Carbodur® products strategically improve the the sustainability performance of these products. Selection and resistance of structures to static and dynamic loads, while pro- proportioning of the filler components take account of the lo- tective elements serve to increase their durability. Sika coatings cally available raw materials and individual customer needs. guarantee long-term protection for concrete and steelwork assemblies against climatic conditions, chemical action, pollution and fire.

Sika Annual Report 2014 Products & Innovations 34 Industry Investment Industrial production requires adhesives that cure as rapidly as possible regardless of climatic conditions. In response to this To ensure that new and patented products can be brought to trend, research is now under way on new cure-acceleration tech- market as quickly as possible, a seven-stage development nologies and novel two-component systems with adjustable process for products, the Product Creation Process (PCP), is force transmission. Another development focus is on adhesives employed worldwide by Sika. The regional technology support that combine high strength with elasticity for bonding compos- functions are responsible for compliance with the PCP in their ite materials, particularly in the automotive industry. area and perform regular PCP audits to review process quality. The audits ensure that employees always have an up-to-date state of knowledge that meets the high standards specified by Research strategy Sika and that local chemists are familiar with the latest technologies. At the same time, special workshops are held to col- Sika carries out its R&D activities through 20 global technol- lect innovative ideas from the regions and leverage these for the ogy centers in America, Europe and Asia. Responding to global Group. trends – such as resource-saving building methods, energy-efficient construction materials or lighter and safer vehicles –, the Total expenditures on research and development for the Group research sets out to innovate new technological building blocks in the year under review totaled CHF 167.7 million (previous year: that will drive the product development process. This, in turn, is CHF 166.1 million), equivalent to 3.0% of sales (previous year: geared to local needs and the particularities of the construction 3.2%). industry in different countries – e.g. with regard to raw materials, climate or legal framework – which may sometimes neces- sitate considerable adaptations to products. Intellectual property

Sika maintains exclusivity over its innovative products through Collaborations systematic registration of its intellectual property rights. In 2014, Sika filed for 70 patents (2013: 73) and made 72 invention Sika collaborates with numerous distinguished universities disclosures (2013: 73). worldwide and is closely involved in a range of international research projects, e.g. through its membership of the Nanocem Consortium. This European research network studies nanoscale- to-microscale phenomena that influence the performance of cementitious materials and the products and structures in which they are used. Sika also participates in the Sustainable Construction Partnership Council of ETH Zurich (Swiss Federal Institute of Technology) and in the United Nations Sustainable Buildings and Climate Initiative.

Product Creation Process PRODUCT CREATION PROCESS

SCIENCE PUSH MARKET PULL OBSOLESCENCE

Technology Creation Process

Equipment Creation Process Product Development Process

Trading Product Process Product Maintenance Process Elimination Process

R & D Corporate Operations Procurement Corporate Expert Teams

Sika Annual Report 2014 Products & Innovations 35 New Products 2014

2014 saw Sika launch onto the market a number of new impor- –– Sikalastic® 641, liquid roof membrane based on i-Cure tech- tant products, which include the following: nology, with extra-low VOC emissions and extremely low-odor –– SikaViscocrete®, concrete plasticizers which offer both en- application. hanced robustness and longer workability times for concret- –– SikaHyflex®-220 Window, adhesive and sealant purpose- ing on large job sites, though without slowing down the con- developed for on-site door and window installation, offer- crete set. ing primerless adhesion to many substrates, notably PVC or –– SikaGrind® LS-43, novel cement additive allowing the use of powder-coated door and window frames. a much higher proportion of limestone as cement clinker sub- –– Sika MaxTack® Ultra, SikaBond® Ultra, new adhesive sys-

stitute, thereby considerably lowering the CO2 burden on the tems with unique fast-tack properties, for builders, mer- environment. chants and DIY stores. –– SikaSigunit® AF, new suspension-based, alkali-free accelera- –– Sikaflex®-UHM, polyurethane adhesive combining elastic tor for high-performance shotcrete applications in both tun- and structural properties which paves the way for composite neling and rock/slope stabilization. structural solutions in automotive design, e.g. bonding of car- –– Sarnafil® G 410 FSA, self-adhesive PVC roof membrane for bon fiber-based car bodies to aluminum chassis. rapid, solvent-free installation on buildings. –– Sikasil® GS-687, two-component silicone adhesive that al- –– Sika® Tuff-N-Uff®, foamed, random-strand nonwoven for lows the full-surface bonding of novel sandwich panels and pipeline protection. their integration as a decorative feature in the overall archi- –– SikaGrout®, comprehensive family of grout products with a tectural composition. substantially reduced carbon footprint, achieved through the –– SikaBaffle®-450, range of sound-damping foam products to use of alternative admixtures, and thus with lower cement seal body cavities in automotive manufacturing, setting new contents. standards in acoustic performance while offering new cre- –– Sikadur®514 Plus, epoxy-bearing high-performance mortar ative scope for design. with outstanding flow properties thanks to the use of Sika –– SikaMelt®-9631 SF, first polyurethane hot-melt adhesive ViscoCrete polymers. The mortar exhibits first-rate mechani- without R40 hazard warning (EU REACH Chemicals Regula- cal properties and meets the requirements of the American tion) through offering equivalent performance to standard Petroleum Institute. products subject to labeling requirements. –– SikaGrout® 3200, high-performance grout for wind power applications, offering excellent pumpability and high fatigue resistance that enables it to withstand extreme wind and weather conditions. –– Sikafloor® 701, 702, 721, range of epoxy-based industrial floor coatings with extra-low VOC emissions and the first benzyl alcohol-free products. –– Sikafloor® Purcem® Glossy, water-based hybrid flooring system combining polyurethane and cementitious constituents for extra-heavy duty, with gloss finish otherwise only achievable by solvent-bearing epoxy systems.

Sika Annual Report 2014 Products & Innovations 36 Sustainable Development Responsibility for the future

Sika takes a long-term perspective on the Standards and compliance development of its business and acts with To ensure the binding force of the Code of Conduct, Sika compa- respect and responsibility towards customers, nies staged a number of information and training events. Sika also published a “Values and Principles” brochure in 2014, the stakeholders and employees. Sika operates contents of which were outlined in closer detail to all employees with a strong focus on safety, quality, at in-house events. Forming the core of Sika’s corporate culture, environment, fair treatment, social involve- these values and principles relate to the following aspects: Cus- ment, responsible growth, and value creation. tomer First, Courage for Innovation, Sustainability & Integrity, Empowerment & Respect, and Manage for Results.

Reporting Sustainable Development Sika reports its key sustainability performance results in line with the G4 Guidelines of the Global Reporting Initiative (GRI As a globally operating technology-based company, Sika is es- G4). In dialog with internal and external stakeholders, Sika pecially committed to sustainable development. The company defined the target indicators with the largest potential effect honors its responsibilities by offering sustainable solutions for and enshrined these in its global reporting procedures. These energy-efficient construction and economical vehicles. It imple- results and findings are presented in the sustainability report ments numerous internal measures aimed at enhancing its (see page 47) and in detail on Sika’s website at http://www. sustainability performance and achieving business, social and sika.com/gri. ecological benefits.

More Value – Less Impact Commitment The sustainability strategy developed by Sika in 2013 was implemented and communicated in 2014. With the avowed aim Sika has pledged to gear its actions and strategies to global- of “enhancing utility and reducing negative impacts,” the com- ly accepted principles in the areas of human rights, labor law, pany defined six strategic target areas that focus on economic environmental protection and anticorruption policy. For many performance, sustainable solutions, local communities/society, years, the company has been actively involved in the chemical energy, waste/water and safety. Through its products, systems industry’s Responsible Care sustainability program. It is also a and solutions, Sika seeks to generate benefits for stakeholders cosignatory and a member of the UN Global Compact corporate that far outweigh the negative consequences of the production responsibility initiative, the Carbon Disclosure Project and the process and resource consumption. World Business Council for Sustainable Development.

Global implementation Sika’s sustainability strategy was implemented worldwide in 2014. Sika companies in all regions are working on projects cen- tered on the achievement of the six strategic targets. To this end, each of Sika’s subsidiaries has developed a roadmap to define the key aspects of the projects and control their implementation. A selection of projects was showcased at global and local level as part of Sika’s “More Value – Less Impact” communication campaign. www.sika.com/sustainability

Sika Annual Report 2014 Sustainable Development 37 Six Sustainability Targets

In dialog with internal and external stakeholders, Sika defined the six target indicators with the largest potential effect.

Economic performance Sustainable solutions Local communities/society

Our success directly benefits all We are leading the industry. We are We build trust and create value – stakeholders. pioneering a portfolio of sustainable with customers, communities and products, systems and services. with the society.

TarGEt TarGEt TarGEt Operating profit (EBIT) above 10% All new projects are assessed in 5% more projects per year. of net sales. accordance with Sika’s Product Development Process. All local key projects are implemented.

More Value

Less Impact

Energy Water/Waste Occupational safety

We manage resources and costs We increase the water and material Sika employees leave the workplace carefully. efficiency. healthy.

TarGEt TarGEt Target 3% less energy consumption per ton 3% less water consumption and 5% less accidents per year. and year. waste per ton and year.

Sika Annual Report 2014 Six Sustainability Targets 38 Acquisitions & Investments Supporting growth in the target markets

Acquisitions continue to be an important 2014 acquisitions element of Sika’s growth strategy, enabling the company to enhance its core business In February 2014, Sika acquired Lwart Química Ltda., a leading manufacturer of waterproofing systems in Brazil. The takeover with related technologies or improve access in has strengthened the Sika Group’s position in the Brazilian con- specific markets. Through capacity expansion struction chemical market and expanded its geographical pres- fine-tuned to market demands, and invest- ence in the country. Lwart Química last year recorded net sales ment in plant efficiency, the Group ensures the of CHF 33 million. The company has established a solid custom- consolidation of its global growth potential. er base and markets two well-known brands. Together with the newly acquired production plant in Lençóis Paulista, Sika now operates five factories in Brazil, with a total headcount of over 700. The acquisition offers Sika new opportunities for cross sell- Acquisition strategy ing, both with direct customers and with builders, merchants.

Organic growth, i.e. growth driven by entrepreneurial endeavor, April 2014 saw Sika acquire a production site in South Korea is at the core of Sika’s corporate strategy. This organic growth through its Korean subsidiary. The additional resources offered is compounded by carefully targeted external growth which of- by the approximately 30-strong workforce will enable Sika to fers a useful way of closing existing gaps in access to the target widen its offering of locally produced epoxy, acrylic emulsion and markets and consolidating fragmented markets. Particularly polyurethane floorings and coatings, and to expand manufac- in North America, Asia and parts of Europe and Latin America, turing capacity for the entire product range. Sika pursues this policy as a means of consistently improving its market position. At the same time, however, the company seeks In mid-May 2014, Sika took over the business operations of to strengthen or extend its core business through the selective Klebag Chemie AG, a manufacturer of adhesives for the bond- acquisition of related technologies. Sika mainly finds these ing, sealing and flooring markets. This move has strengthened technologies in small and medium-sized enterprises in Europe, Sika’s position in the Swiss interior finishing sector.K lebag’s net the USA and some Asian countries. The fact that such business- sales in the last financial year stood atC HF 12 million. The comes are usually unable to market their systems worldwide sooner pany has a broad customer base and enjoys a reputation for top- or later proves a barrier to their own growth. By acquiring such quality customer service, technical support and training. Follow- companies, the Sika Group, as a global player, is able to leverage ing the takeover of AkzoNobel’s Building Adhesives business, their full potential. Everbuild Building Products, and Optiroc in 2013, as well as Tech- nokolla in 2011, this latest acquisition marks another major step When evaluating a takeover offer, Sika relies on its existing ex- in consolidating Sika’s position in the interior finishing market. pertise and experience, as well as on clearly defined processes in place across the Sika Group. Given that, in most cases, acquired companies are fully incorporated into the Group, Sika is at pains 2014 investments to ensure that this integration runs smoothly. Sika therefore pays particular attention to the corporate culture of all takeover Sika’s unchanged investment strategy is geared to consolidat- candidates prior to any acquisition. ing its global presence, built up during the last few years, and unlocking new markets or expanding its activities to this end. The individual regions generally assume responsibility for their To encourage focused growth, selected markets, customers, own particular acquisition procedures. The process is supervised technologies and products are prioritized. Investment fell only and coordinated at Group level. slightly year-on-year. Sika continues to invest in production and logistics capacities at its sites in order to strengthen the local supply chain, and its decentralized market development policy brings the company very close to its customers.

Sika Annual Report 2014 Acquisitions & Investments 39 In the year under review, Sika invested CHF 152.8 million (2013: CHF 153.9 million), equivalent to 3% of net sales. At 56%, the key focus for investment was the expansion of production capacity (2013: 47%). The breakdown of the remaining investment is as follows: 13% (2013: 16%) was used for rationalization, 27% (2013: 34%) was needed to replace existing facilities and 4% (2013: 3%) was spent on environmental protection, health and safety as well as quality control. The share of investment in the emerging markets was 38% (2013: 43%), underscoring Sika’s growth strategy.

Sika will continue to invest in those regions where the Group can tap into new markets and generate growth. These include North and South America, China, India, Indonesia, Thailand, Peru, Ec- uador and Africa.

Sika Annual Report 2014 Acquisitions & Investments 40 Group Review

Sika Annual Report 2014 Acquisitions & Investments 41 Group Report Continued high growth momentum

The Sika success story continued in the 2014 fi- Accelerated expansion in the emerging markets produced con- nancial year, with currency-adjusted sales up by vincing sales growth of 15.2% in local currencies and 6.4% in 8.3% to CHF 5.571.3 million. In local currencies, Swiss francs for Sika. The proportion of sales generated by Sika the increase amounted to 13.0%. Sales reached in the emerging markets is 37.0% (2013: 37.7%). record levels in all regions. All relevant growth Sika increased sales of products for the construction industry by targets for full-year 2014 have been exceeded. 13.4% in local currencies, including an acquisition effect of 7.0%. Sika made above-average progress in terms Sales of products for industrial manufacturing increased 11.1% in of profitability. Operating profit increased by local currencies, with no acquisition effect. 21.0% to CHF 633.2 million, and net profit by 28.0% to CHF 441.2 million. Three acquisitions

In February 2014, Sika acquired Lwart Química Ltda., a leading Growth in all regions manufacturer of waterproofing systems in Brazil. In April, Sika announced the acquisition of a South Korean manufacturer of In the 2014 financial year, Sika achieved sales growth of 13.0% in flooring and coating products, marking another step forward local currencies. Of the total, 7.3 percentage points were attrib- in Sika’s efforts to expand its supply chain in the region Asia/ utable to organic growth and 5.7 percentage points to acquisi- Pacific. In mid-May, Sika took over the business operations of tions. The strength of the Swiss franc caused a currency effect Klebag Chemie AG, a manufacturer of adhesives for the bond- of -4.7%, resulting in currency-adjusted sales growth of 8.3%. ing, sealing and flooring markets. This move has strengthened Sika’s position in the Swiss interior finishing sector. The three All regions contributed to the sales growth with record turn- acquired businesses generated annual sales totaling CHF 53 overs. Sales in the region EMEA (Europe, Middle East, Africa) million in 2013. increased by 13.3% in local currencies in the year under review. Visible growth drivers in the Middle East and Africa and the moderate recovery seen in the southern European markets had Above-average profit growth a positive impact on the region’s development. In the year under review, Sika’s gross margin improved slightly North America recorded a 7.9% increase in sales in local curren- to 53.0% (2013: 52.4%). With personnel expenses and other op- cies. Construction projects put on hold in recent years are now erating expenses rising less strongly than in the previous year, being carried out. An increasing number of investments are be- Sika increased its operating result by 21.0% to CHF 633.2 mil- ing made in infrastructure projects and commercial buildings. lion (2013: CHF 523.5 million). The EBIT margin was 11.4% (2013: 10.2%). Sika increased its consolidated net profit by 28.0% to The region Asia/Pacific witnessed a 12.8% increase in sales in CHF 441.2 million (2013: CHF 344.7 million). local currencies, breaking the CHF 1 billion barrier for the first time. The majority of countries achieved double-digit growth rates and further increased their market share. Investments at previous year’s level, improved balance sheet figures At 15.9% in local currencies, sales growth remained consistently high in Latin America in 2014. In a demanding business environ- Sika’s investment strategy is geared to further strengthening ment, Sika benefited from its strong market presence. its presence in the emerging markets. Accordingly, Sika opened a total of eight new factories in 2014, including plants in Bra- In “Other segments and activities”, Sika significantly exceeded zil, Indonesia, India, Serbia, Mexico and Singapore. To support market growth by achieving growth of 16.2% in local curren- growth in the year under review, Sika invested a total of CHF cies. This includes the sales figures for theA utomotive division, 152.8 million, in line with the year-back level (2013: CHF 153.9 whose global operations Sika controls centrally. Car production million). rose by 3.1% globally in 2014. Thanks to a growing trend toward the use of adhesives in modern vehicle construction, the pro- At 17.8%, net working capital as a percentage of net sales was portion of sales generated by Sika products per new automobile held at a consistently low level in 2014 (2013: 17.3%). Top priority saw a significant increase. continues to be given to the management of inventories and accounts receivable. Operating free cash flow came toC HF 417.5 million in the year under review (2013: CHF 432.7 million). Sika

Sika Annual Report 2014 Group Report 42 held cash and cash equivalents of CHF 898.8 million at year-end (2013: CHF 1,028.3 million). Net debt was reduced to CHF 82.5 million (2013: CHF 271.4 million), and gearing was 3.5% (2013: 3.5%).

The equity ratio now stands at 49.5% (2013: 45.1%).

Sika Annual Report 2014 Group Report 43 Group Report Regions RECORD SALES IN ALL REGIONS

Sika generated record sales in all regions and LATIN AMERICA 15.2% growth in the emerging markets. The slowdown in economic growth in the region Latin America continued through 2014. Brazil’s markets stagnated, while Ar- gentina and Venezuela struggled with high inflation. Columbia EMEA was the only country to experience steady growth in the order of 5%. Sika increased sales in the region EMEA (Europe, Middle East, Despite this challenging business environment, Sika Latin Africa) by 13.3% in 2014. Perceptible growth stimuli in the Mid- America still generated double-digit growth in most countries dle East and Africa, and the slight recovery in the southern Eu- and further increased market share. With an overall level of ropean markets, had a positive impact on the company’s overall 16.0%, Sika succeeded in maintaining high sales grow th in 2014. performance in the region. Substantial devaluations of a number of local currencies led to In 2014, Sika was once again involved in a number of major proj- high exchange rate losses. ects in the region EMEA, including the Moscow Metro exten- In Brazil, Sika acquired waterproofing specialist Lwart Química sion and various construction projects for the 2022 World Cup and opened a new factory – its seventh in the country – in the in Qatar. state of Goiás. Sika also opened a further production plant in Production capacity has expanded at several locations, and ac- Mexico. tivities in this area included the opening of the company’s first factory in Serbia. Sika established new subsidiaries in Bosnia- Herzegovina, Albania, Nigeria, Mozambique and the Ivory Coast. ASIA/PACIFIC In May 2014, Sika acquired Klebag, the Swiss-based manufacturer of adhesives for the bonding, sealing and flooring markets, With the economies in the region Asia/Pacific continuing to thereby strengthening its position in the interior finishing sec- grow during the reporting year, Sika achieved growth in all tor. The process of integrating Klebag is running to schedule. market segments. Double-digit percentage growth rates and increased market share were achieved in most countries. Imple- mentation of the growth strategy – geographical expansion, NORTH AMERICA supply chain extension, new product launches and efficient product management – combined with the new acquisitions led 2014 saw a sharp improvement in the economic situation in to sales increase of 12.9%. North America, and there was a significant year-on-year rise in One of the major projects involving Sika products during 2014 the volume of new construction projects. Sika particularly ben- was the 530-meter-tall Chow Tai Fook Center in Guangzhou, efited from rising investment in industrial buildings and infra- China. structure projects. During the reporting year, Sika opened new factories in Indo- In addition to favorable market trends new product launches, nesia, Singapore and India, and set up a new subsidiary in Sri better market positioning, and productivity gains helped Sika Lanka. North America grow its sales by 7.9% and improve its margins Furthermore, Sika acquired a leading manufacturer of cementi- by a substantial amount. tious powder products in Singapore and a flooring and coatings Sika is involved in most major construction projects in the re- company in South Korea. The holdings in Dyflex (Japan) and Ji- gion, including a railroad tunnel in New York City, the new Tesla angsu TMS (China) were increased to 100%, and to 85% in Hebei factory in Nevada, and the Minnesota Vikings football team’s Jiuqiang (China). new stadium. Two new factories – in Atlanta and Denver – were opened in the region.

Sika Annual Report 2014 Group Report Regions 44 Sika in 90 Countries

The Regions in Brief

EMEA North America Latin America Asia/Pacific Other segments and activities

Net sales in CHF mn (previous year) 2,734.0 (2,470.2) 746.3 (711.2) 638.6 (622.8) 1,039.7 (973.7) 412.7 (364.3) Growth in local currencies 13.3% 7.9% 16.0% 12.9% 16.2% Currency impact -2.6% -3.0% -13.5% -6.1% -2.9% Acquisition effect 9.2% 0 % 4.9% 3.6% 0% Number of employees 8,708 1,488 2,609 4,090

Sika Annual Report 2014 Group Report Regions 45 Outlook Continued growth

In the 2014 financial year, Sika consistently pursued and globally implemented the Strategy 2018 it launched the previous year. Sika’s growth model is the foundation for long-term success and for profitable, above-average growth.

Through investments in growth markets, the launch of new products, and the acquired companies, Sika is poised to continue its growth strategy in 2015. However, currency movements and the conditions prevailing in some markets will continue to pose a challenge in the current financial year.

For the current financial year, Sika expects to see a result consistent with the Strategy 2018, with sales growth of 6 to 8%, assuming constant exchange rates and stable margin trends.

Sika Annual Report 2014 Outlook 46 Sustainability Report Enhancing utility and reducing negative impacts while assuming social responsibility

As a globally operating technology-based under no circumstances tolerates any form of corruption or hu- company, Sika is especially committed to man rights infringements. Absolutely no leeway is allowed in sustainable development. The company honors respect of any breaches of these values. Integrity, ethical and principled conduct, and adherence to the law are the foundation its responsibilities by offering sustainable on which Sika’s impeccable reputation is built. This is what cus- solutions for energy-efficient construction and tomers and all other stakeholders – most notably, the Sika staff economical vehicles. It implements numerous and shareholders – have rightly come to expect. measures aimed at boosting the Group’s sustainability performance and achieving business, To ensure the binding force of the Code of Conduct, Sika com- social and ecological benefits. panies staged a number of information and training events in the reporting year. Furthermore, Sika published a “Values and Principles” brochure in 2014 and instructed all employees at in-house events. Forming the core of Sika’s corporate culture, Sika’s sustainability strategy these values and principles relate to the following aspects: Cus- tomer First, Courage for Innovation, Sustainability & Integrity, In 2014, Sika started the worldwide implementation of the sustain- Empowerment & Respect, and Manage for Results. ability strategy developed the year before. With the avowed aim of “More Value – Less Impact” the company defined six strategic These internal standards summarize the key principles of the targets to focus its activities over the coming years on economic Sika management style, which is based on mutual trust and performance, sustainable solutions, local communities/society, en- personal responsibility at all levels. In the year under review, ergy, waste/water and safety. Through its products, systems and Group Management created the position of Corporate Compli- solutions, Sika strives to create long-term benefits for all its stake- ance Officer to strengthen the compliance organization, refine holders and to reduce resource consumption and impacts associ- these important ethical principles, describe the necessary pro- ated with production significantly (see also “Sustainable Develop- cesses, bundle the associated tasks within the company and ment” on page 37 ff. of the download version of this report). coordinate them among the different units.

Main instruments to implement the sustainability strategy If Sika employees anywhere in the world have doubts or ques- globally in the year under review were the “More Value – Less tions about matters relating to the content of the Sika Code of Impact” campaign and the new management and reporting sys- Conduct or the company values and principles, they are required tem in line with the G4 Guidelines of the Global Reporting Initia- to contact their line manager, Corporate Legal or Corporate HR. tive introduced at local level (GRI G4). Key results and findings Sika has also set up a central help desk. are presented on the following pages. Full details are available on the Internet at www.sika.com/GRI. The senior management teams at the individual subsidiaries are mandated to enforce compliance with the Code of Conduct and with all relevant laws and standards. Management and organization Sika also assumes responsibilities for the supply chain. Through Group Management tasked the Corporate Sustainability Office amendments made to the Supplier Code of Conduct in 2013, the with implementing the sustainability strategy. Local implemen- Group ensured that suppliers are fully informed of Sika’s ethical, tation and embedding is ensured by line management and the ecological and social guidelines and expectations. Sika defined a network of local and regional managers responsible for product new Group-wide process in the reporting year that maps out the sustainability, Environment, Health & Safety (EHS) set up in main sustainability principles (economic, social and ecological) 2013. The network supports local Sika companies in brainstorm- for supplier qualification and evaluation. The multi-stage sup- ing, planning and realizing of cross-regional measures. Through plier evaluation process has three central elements: It requires a communication campaign, it informed all internal stakehold- all suppliers to sign the Supplier Code of Conduct and to com- ers about the new sustainability strategy and included them in plete a self-report questionnaire. In unclear cases, the Purchas- planning and implementing respective measures. These activi- ing department will follow up with sustainability audits before ties are going to be extended and intensified in 2015. concluding a supply contract. Sika will be implementing this new process globally in 2015, initially focusing on high-risk geogra- Standards And Compliance phies and industries. In the year under review, Sika globally introduced the Code of Conduct revised in 2013. It applies to all employees and is familiar to them. The code states, among other things, that Sika

Sika Annual Report 2014 Sustainability Report 47 Inspections and audits Sustainable solutions Inspections and audits are core elements of Sika’s comprehen- Sustainability is a key component of the company’s drive for in- sive management system. They provide management at Group, novation. Sika strives to extend the service life of buildings and regional and local company level with a regular, independent industrial applications and to improve both energy and material assessment as to whether all activities comply with official efficiency. The company continues to make every effort to re- requirements as well as with Sika’s own internal guidelines, duce resource consumption and CO2 emissions – both internally principles and risk management specifications. The inspections and for partners who place their trust in Sika products. and audits thereby ensure the effectiveness of the relevant processes and controls at Sika. The auditing process is centrally Sika aims to lead the industry and pioneer with a portfolio of organized and is overseen by the Audit Committee of the Board sustainable products, systems and services to tackle global of Directors. Group Management is regularly informed about the challenges safely with the minimum possible impact on resourc- planning of inspections and their results. In all, Sika conducted es. The two Group goals are: 111 audits in the reporting year and implemented associated improvements wherever necessary. The audits covered all aspects Target – New product developments are reviewed: of Sika’s business operations, including quality control, environ- New product developments are reviewed against key sustain- ment, safety, health, risk management, technology, compliance, ability criteria including a documented, recognized relevance au- IT security, suppliers and products. dit and an appropriate improvement plan where necessary.

To ensure that suppliers also meet the official requirements and Implementation: Sika has introduced a new sustainability labor standards, Sika calls on them to perform2 self-assessments evaluation process (incl. guidelines and tools). It is part of the and itself conducts supplier audits. In the year under review, a to- official Sika product development process, which was reviewed tal of 40 suppliers in China and India were assessed according to in 2014. The objective of the sustainability evaluation is to as- the new vendor evaluation process. As a supplier to major cus- sess all sustainability aspects of a new development over its en- tomers – particularly from the automotive and industrial sectors tire life cycle, compared with the company’s own or competitive – Sika is itself often subject to external audits. These audits are solutions. Economic, social and ecological aspects are assessed designed to ensure compliance with international labor standards and serve as a basis for any decision to improve a development. and prescribed quality, environment, safety and health criteria. If a new solution fails to provide an improvement over the existing product, it is normally not worthwhile to pursue a develop- Involvement of stakeholders ment any further. On the other hand, if a significant improve- Sustainable development is not something that any company ment over the existing product is achieved, the relevant projects can pursue in isolation. That is why Sika actively seeks the in- must be prioritized for special attention. volvement of internal and external stakeholders, such as employees, customers, suppliers, shareholders, authorities, gov- As Sika defined and introduced the sustainability evaluation ernments and associations. In developing its sustainability process during the reporting year, only a few product develop- strategy in 2013, as part of a materiality analysis Sika consulted ment projects have been reviewed to test the new procedures. the principal internal and external stakeholders on what they They will become a mandatory component of the innovation considered to be the most important sustainability issues. In or- process in 2015. der to review and adapt the findings of this analysis, Sika regularly engages with the various stakeholder groups. The material- Target – All planned sustainability projects are ity analysis will be conducted again at the end of 2015. implemented: The larger Sika companies draw up a product sustainability plan geared to local demand and containing key projects and themes aligned with the global approach. All key Sustainability: Targets and projects are carried out in accordance with the approved plan. implementation Implementation: In 2014, larger countries in the following More value or enhancing utility regions drafted product sustainability plans in collaboration Sika takes a long-term perspective on the development of its with the Corporate Product Sustainability department: North business, and acts with respect and responsibility towards America, Southern Europe, Northern Europe, Eastern Europe, customers, stakeholders and employees. Sika operates with a the UK, Germany, Turkey and Mexico. Sika has created regional strong focus on safety, quality, environment, fair treatment, so- and local product sustainability roles to facilitate the develop- cial involvement, responsible growth, and value creation. ment, launch and handling of these plans. Quarterly virtual meetings take place between the local and regional roles, as Sustainability has always been part of Sika’s identity. The com- well as between the regional and global roles, to manage plans pany aims to continually measure, improve, report and commu- and discuss progress and activities. The focus in 2015 will be on nicate sustainable value creation. “More Value – Less Impact” implementing planned activities locally and extending planning refers to Sika’s obligation to maximize the value of its solutions to Latin America. and contributions for all stakeholder groups, while simulta neously minimizing risks and resource consumption. Practical implementation of the “More Value – Less Impact” motto calls for sound data and knowledge about the effects of product manufacturing and the added value of finished prod-

Sika Annual Report 2014 Sustainability Report 48 ucts in their application and use. In the year under review, Sika to support communities in infrastructure development for so- expanded the life-cycle data it had collected in 2013 for its prod- cial projects, to promote training in construction professions ucts, technologies and applications in accordance with the in- and trades, and to provide emergency aid to disaster-stricken ternational Life-Cycle Assessment (LCA) standard ISO 14040 regions. The Sika Board of Directors established the Romuald and further developed the existing reference database. This Burkard Foundation in 2005 in memory of Dr. Romuald Burkard, enabled Sika to develop a set of new tools for the national sub- the third-generation representative of the Winkler family, who sidiaries to use, including Environmental Product Declarations founded Sika. Sika seeks to promote on-the-ground self-help. (EPD) for roofing membranes according to German, UK and US The local Sika companies are thus required to put forward spe- standards and tools to assess the sustainability performance of cific aid applications and, working with local partners, supervise roofing and flooring systems as well as concrete mix designs.A s the projects on site up to completion. Via the Romuald Burkard a benefit for customers, they quantify the project-specific sus- Foundation, Sika supported the following major projects in the tainability performance of the selected Sika solution and allow year under review: for simple and comprehensible communication. Leveraging the acquired expertise in the market, a number of companies have Yayasan Tirta Lestari (YTL) is a nonprofit organization whose successfully launched and tested new services to quantify the mission is to improve health care, water supply, sanitation and sustainability performance of Sika solutions. drainage facilities in Indonesia. YTL is incorporated in the US umbrella organization WatSan Action. Sika has been the main This marks Sika’s aim to develop further from a product to a sponsor since 2008. Every year, YTL helps to improve the living solution provider, serving its customers with innovative solu- standards of 1,500 people. Aid provided in 2014: CHF 42,000. tions and substantially enhancing the efficiency, durability and http://watsanaction.org aesthetic appeal of buildings, infrastructure facilities, installations and vehicles. The integrated concepts and solutions Since 1968, the ATMI (Akademi Tehnik Mesin Industri) vocation- address the entire life cycle of a facility, from initial construc- al training center in Surakarta (Solo), Central Java, has been pro- tion and maintenance, through refurbishment or extension, to viding young people from the lower and middle classes with an deconstruction. opportunity to learn a technical trade. Having given its support in past years to build the training infrastructure, Sika helped Extensive product and project case studies from all target mar- fund the expansion of further building tracts in 2014, including kets can be found at www.sika.com/sustainability. They detail boarders, sleeping quarters. Aid provided in 2014: CHF 200,000 how Sika solutions support sustainable construction and help to and products worth CHF 70,000. save energy, raw materials and water and reduce CO2 emissions. www.atmi.ac.id

In Greece, Sika supported the welfare organization The Smile of Social responsibility the Child, which helps children from socially and financially disadvantaged families as well as orphans. With Sika’s support, a Social, economic and ecological issues are closely intertwined. day clinic for children with psychological problems was set up in Social responsibility is a necessary component of success. Mind- 2014. Aid provided in 2014: CHF 80,000. ful of its obligations, Sika actively engages in sustainable and www.hamogelo.gr humanitarian development projects, either as a member of international organizations or directly on the spot. Sika’s social in- Sponsoring four schools, Sika has launched a program to help volvement also embraces the sponsorship of organizations and finance the education of children from Myanmar’s poorest re- initiatives in the fields of science, culture and sport. gions in 2014. The respective infrastructures were extended, and furnishings and school materials were purchased for a total Sika aims to build trust and create value – with customers, local of 600 children. Aid provided in 2014: CHF 50,000. communities and society as a whole. The Group goals are: www.600kids.org

Target – 5% more community projects per year: Social Sika has supported the activities of the nonprofit organiza- projects benefit all non commercial stakeholder groups of local tion Operation Smile in Vietnam since 2010, and in Thailand companies and their neighborhoods. They encompass monetary since 2014. Thanks to the assistance of committed volunteers, benefits or material donations, local projects and community en- the organization has since 1989 arranged operations for some gagement programs, dialog with stakeholder groups, community 200,000 children and youths with cleft lips and palates or simi- consultation procedures, social activities and programs, train- lar facial disfigurements. In Thailand, Sika employees did vol- ing, environmental projects or recovery programs. unteer work at the Mae Sot Hospital between November 2 and 7, 2014. Sika financed 156 examinations and 107 surgical opera- Implementation: Sika supported 67 projects in 2014 (previ- tions. Aid provided in 2014: CHF 100,000 (Vietnam), CHF 58,000 ous year: 52 projects), a year-on-year increase of 29%. Sika sup- (Thailand). ported the following priority projects: www.operationsmile.org

SOCIAL SPONSORING Since 2007, Sika has supported the Pan de Vida orphanage in Social sponsoring at Sika is mainly organized through the Ro- Mexico, where disadvantaged children and youths have the muald Burkard Foundation. Its main goals, among others, are chance to live and study. The funds provided in the year under

Sika Annual Report 2014 Sustainability Report 49 review covered scholarships for five young people, the construc- SCIENTIFIC SPONSORING tion of a sports ground, a dental care program and the building As project sponsor, Sika engages in a lively dialog with ETH Zu permit costs for a new residential block. Aid provided in 2014: rich (Swiss Federal Institute of Technology in Zurich), the Uni- CHF 26,000. versity of Fribourg, the EPFL (Swiss Federal Institute of Tech- www.pandevida.org nology in Lausanne), the ESPCI ParisTech (School of Industrial Physics and Chemistry of the City of Paris), the University of Sika has supported the Liter of Light organization since 2012, Burgundy, Princeton University, the Beijing University of Chemi- when it was founded by ten master’s students from the Uni- cal Technology and many similar institutions across the globe. versity of St. Gallen in Switzerland. The organization sets out Sika’s local subsidiaries cooperate with research institutes and to provide underprivileged areas of the world with an alterna- provide mutual support. tive light source made from reused plastic bottles. In 2014, Sika sponsored Liter of Light projects in Bangladesh, India, Kenya, ETH ZURICH: Professor Jan Vermant took up his post as Full Nicaragua, the Philippines, South Africa and Tanzania. Value of Professor of Soft Materials at ETH Zurich in August. Endowed products supplied free of charge in 2014: CHF 12,000. by Sika, the professorship addresses soft materials (e.g. gels, www.literoflightswitzerland.org polymer melts and rubber) and their interfaces. 2014 was the fifth year in which the Sika Master Award was presented to the Sika has supported an orphanage in the municipality of Valea author of an outstanding master’s thesis in the field of applied Lupului in eastern Romania since 2010. The construction of a chemistry, based on the recommendation of ETH’s Department guesthouse created jobs for a number of young people who had of Chemistry and Applied Biosciences. Sika also participates in grown up as orphans. Aid provided in 2014: CHF 25,000. the Sustainable Construction Partnership Council. This inter- www.valealupului.ch disciplinary forum promotes a dialog on current research top- ics, supports resources and knowledge transfer, and encourages Sika supported the UPSV orphanage in Brasov, Romania, in the the launch of joint research projects in the field of sustainable reporting year. The institution not only offers a home for chil- construction. dren and adolescents, but also helped over 100 young people to find work and establish a foothold in society. In addition to UNIVERSITY OF FRIBOURG: The University of Fribourg and Sika giving financial support, Sika also helped to renovate one of the signed a cooperation agreement in the year under review. A re- buildings. Aid provided in 2014: CHF 100,000. search group on management in emerging markets was established at the Faculty of Economics and Social Sciences in 2014. Sika Baar in Switzerland supports the local scouts and guides, Reflecting the growing significance of newly industrializing the largest such division in Central Switzerland as well as Baar’s countries for the strategies of western companies, the objective biggest youth organization. In the year under review, work be- of the cooperation venture between the University of Fribourg gan on renovating the existing buildings and constructing a and Sika is to enable research and teaching on management in functional new building equipped to cater to the needs of peo- emerging markets at the University of Fribourg. ple with disabilities and able to accommodate 220 scouts and guides. Work is scheduled for completion in 2015. Aid provided YES COURSES: Sika continued its sponsorship of YES (Youth in 2015: CHF 50,000. Encounter on Sustainability) courses worldwide in 2014. The courses, developed by a spin-off from the ETH Zurich, address ECOLOGICAL SPONSORING various aspects of sustainable development and are primarily The focus of Sika’s ecological sponsoring is on water, building, geared to students. Sika was actively involved in a course in infrastructure and renewable energy projects. The main spon- Bremerhaven, Germany, in the reporting year. Aid provided in sorship partner in this field is the GlobalN ature Fund (GNF). Sika 2014: CHF 70,000. has supported the GNF and its international Living Lakes en- www.actis-education.ch vironmental program since 2004. Comprising over 100 partner organizations from various lake regions across the globe, the SPORTS AND CULTURAL SPONSORING Living Lakes network sets out to promote sustainable develop- Sika companies support sports and cultural projects throughout ment and the protection of drinking water, lakes and wetlands. the world. The focus of sponsorship in Switzerland is on the Lu- The initiative uses successful models and concrete projects to cerne Symphony Orchestra, the EV Zug ice hockey club and the demonstrate how, with the involvement of the local population, Swiss Sliding sports association. positive social and economic developments can be achieved in different regions and societies without any threat to nature and LUCERNE SYMPHONY ORCHESTRA: Sika has been a partner of the environment. In the reporting year, Sika sponsored drink- the Foundation for the Lucerne Symphony Orchestra (LSO) for ing water and environmental projects in Burundi, Côte d,Ivoire, several years now. The foundation sets out to promote the artis- Kenya, Colombia, the Philippines and South Africa. Sika also tic reputation of the LSO at regional, national and international supports efforts to reinforce park management and develop level. It supports outstanding creative projects undertaken by sustainable tourism within the Lake Hovsgol National Park in the LSO and fosters the innovative development of the orches- Mongolia. Aid provided in 2014: CHF 90,000. tra. As Switzerland’s oldest symphony orchestra, the LSO enjoys www.globalnature.org international acclaim. Sponsorship sum in 2014: CHF 100,000. www.sinfonieorchester.ch

Sika Annual Report 2014 Sustainability Report 50 150TH ANNIVERSARY OF BILATERAL RELATIONS BETWEEN Energy JAPAN AND SWITZERLAND: February 6, 1864 saw the signing Global megatrends, such as energy and raw materials short- of the first trade and friendship agreement between Japan and ages, urbanization and population growth, are confronting com- Switzerland. To mark this anniversary, Sika was a gold sponsor panies and communities with major economic, social and eco- of the Japan Week (October 22 to 28, 2014) in Bern. Over 1,000 logical challenges. Availability and efficient use of energy and Japanese artists provided a cross-section of the cultural, craft resources are crucial to sustainable development and poverty and culinary traditions of their country. Sika also sponsored the reduction. Sika sees it as its particular responsibility to minimize Japan booth at the Geneva Book Fair (April 30 to May 4, 2014). impact on climate change by reducing energy consumption from Sponsorship sum in 2014: CHF 10,000 (Japan Week), CHF 10,000 nonrenewable sources with the positive effect of lowering costs (Geneva Book Fair Japan Booth Association). and increasing competitiveness. The Group goals are:

EV ZUG ICE HOCKEY CLUB: Featuring on the club kit, stadium ban- Target – 3% less energy consumption per ton and ners and even the ice rink, the Sika logo is now a part of EV Zug’s year: This includes the total energy produced and consumed public identity. The sponsorship agreement with the top Swiss ice by all Sika operating companies and units, both industrial and hockey team was concluded in 2013 and will run until the end of nonindustrial sites. the 2014/2015 season. Sponsorship sum in 2014: CHF 270,000. www.evz.ch Implementation: Sika consumed 1,671 TJ in 2014 (previous year: 1,681 TJ). 55.8% of Sika’s energy requirements were met by SWISS SLIDING: Sika is a sponsor of Swiss Sliding, the associa- electrical power from the local grid. The remaining demand was tion for the Winter Olympic disciplines bobsleigh, luge and skel- mainly covered by natural gas and liquid fuels. eton. Swiss Sliding is committed to both top-level competitive and grass-roots sport, with the development of young talent as Achieving an efficiency improvement of approximately 12%, a key priority. As Reto Götschi, Swiss Sliding CEO, points out: Sika has clearly exceeded its target: The energy consumption “Apart from the financial support, Swiss Sliding also benefits per ton of product sold was at 478 MJ (previous year: 541 MJ). from Sika’s know-how and products.” Sponsorship sum in 2014: This increase in efficiency is mainly due to improved capacity CHF 168,000. utilization at the Sika factories, which lifted production by an www.swiss-sliding.ch average of 22% in 2014, achieving a better utilization of the basic energy consumed. Beyond that, Sika initiated and suc- 2015 STREET HOCKEY WORLD CHAMPIONSHIPS: Sika is the cessfully carried out various energy projects worldwide, as illus- main sponsor of the 2015 Street Hockey World Championships trated by two commendable examples from Turkey and the US. taking place from June 19 to 28, 2015 in Zug, Switzerland. Over In Turkey, the energy required to drive the compressors was cut 1,200 athletes in 26 to 30 teams from around 20 different coun- by 8% thanks to measures to reduce compressed air losses. As tries are expected. This partnership underscores Sika’s aim to part of the program, workers were trained to identify and repair help establish street hockey as a sporting discipline and pro- compressed air leaks in all equipment at the subsidiary’s promote canton Zug’s international positioning. Sponsorship sum duction facilities. In the US, the installation of efficient interior in 2014: CHF 237,600. and exterior lighting led to power savings of 979,000 kWh per http://zug2015.com year. The project was eligible for a New Jersey State incentive to encourage companies to install more energy-efficient lighting.

Less impact or reducing the negative CO2 emissions footprint CO2 is a consequence of fossil energy consumption, and can only be limited by increasing energy efficiency. This is why Sika con-

The following details relate to all business operations of the trols its CO2 emissions via its energy target and has not set a Sika Group, including the activities of the newly acquired com- specific reduction target at Group level. panies, and focus on the core themes of energy, water/waste, occupational safety, and CO2 emissions at the more than 160 CO2 EMISSIONS (DIRECT): CO2 emissions from energy con- Sika production sites. sumed directly by all Sika operating companies and units, both industrial and nonindustrial sites, and by its own vehicles are

Sika constantly improves its environmental protection and safe- calculated based on the reported fuel quantities. CO2 emissions ty performance through its routine investment planning and resulting from the use of primary energy sources added up to maintenance activities. In the year under review, Sika invested around 47,000 tons (previous year: 50,000 tons). A number of a further CHF 6.1 million in technical equipment for accident and factories in China still rely on locally sourced coal as a fuel. This illness prevention, equivalent to around 4% of the total invest- has a low gross calorific value and entails higher CO2 emissions ment (approx. CHF 150 million) in technical equipment. The nu- than natural gas. Changes to the product mix reduced emissions merous other environmental, health, safety and sustainability at two factories, an improvement achieved by partly replacing a measures implemented by Sika in the reporting year involved in- coal-intensive process with a coal-free one. vestments of CHF 23.1 million (previous year: CHF 24.4 million).

Sika employs environment, safety and sustainability specialists CO2 EMISSIONS (INDIRECT): CO2 emissions from energy con- at all its major sites. The total worldwide headcount in this field sumed indirectly by all Sika operating companies and units, both runs to over 100. industrial and nonindustrial sites, by leased vehicles and as a

Sika Annual Report 2014 Sustainability Report 51 result of business travel are calculated based on the reported packaging design, leading to higher productivity and lower ma- energy quantities. CO2 emissions caused by purchased electric- terial use. The Group goal is: ity are calculated using current emission factors from the Green- house Gas Protocol (GHG). Instead of determining the emissions Target – 3% less waste per ton and year: This in- caused by effective power consumption, average values for elec- cludes all waste material sent to external contractors for dispos- tricity production in each particular country are applied. In 2014, al – with the exception of materials returned to suppliers – and

CO2 emissions caused by power consumption were calculated at covers all Sika operating companies and units, both industrial 102,000 tons (previous year: 118,000 tons), i.e. more than twice and nonindustrial sites. as high as direct CO2 emissions. Leased vehicles and business travel caused additional CO2 emissions of 20,500 and 14,000 Implementation: Sika achieved only a moderate improve- tons, respectively (previous year: 17,400 and 17,500 tons). ment in material efficiency in the reporting year. Recording a higher production volume, the company caused 62,000 tons of Extensive project case studies from around the globe detailing waste (previous year: 56,000 tons). This corresponds to 17.9 ki- how Sika was able to save energy at its plants and reduce CO2 lograms of waste per ton sold (revised figure for the previous emissions can be found at www.sika.com/sustainability. year: 18.1 kilograms), or a reduction of 1%. As Sika had reported significant improvements in previous years, material efficiency Water will be a priority in 2015. A large part of the waste – particularly Sika aims to boost the sustainability performance of its produc- from polymer and mortar production – is recycled by external tion sites by reducing water consumption and treating water companies. Extensive measures such as the efficient and eco- locally. The company implements measures to reduce consump- nomical use of raw materials, process optimizations, improved tion or to use lower-grade water qualities especially in geogra- waste sorting and recycling of packaging materials have con- phies where water is scarce. Efficient oductionpr means closed tributed to a global increase in waste efficiency. Sika’s Shanghai loop cooling and switching from public to surface and ground plant, for example, achieved significant material and cost sav- water, reducing the amount of drinking water used in produc- ings by granulating the polyester scrim and felt backing used tion. By reusing wastewater, Sika aims to reduce its water con- in roofing membranes, and feeding the materials back into the sumption on a larger scale. The Group goal is: production process. In 2014, Sika Thailand won a Silver Award from the Industrial Estate Authority Thailand Waste Manage- Target – 3% less water consumption per ton and ment for continuous improvements in operational waste han- year: This includes water consumed by all Sika operating dling. companies and units, both industrial and non-industrial sites, whether from public utilities or from ground or surface water Extensive project case studies from around the globe detailing sources. how Sika managed to reduce waste at its plants can be found at www.sika.com/sustainability. Implementation: In 2014, Sika again used approximately 2 million cubic meters of water (previous year: 2 million cubic Occupational safety meters). With water consumption per ton sold down by around The health, safety and well being of all Sika employees are es- 10% to 0.60 cubic meters (revised figure for the previous year: sential to the success of its business and are core concerns 0.67), Sika exceeded its target due to significantly higher pro- throughout the organization. This requires focus and a sys- duction volumes: Cooling water, accounting for some 80% of tematic approach: occupational standards, management com- water consumption, was deployed more effectively. In the re- mitment, employee involvement, work site and risk analysis, porting year, Sika invested in various water efficiency projects hazard recognition and resolution, training and education are at its factories worldwide, including the plant in Lyndhurst, NJ, key components of Sika’s health and safety framework. A cul- USA, where the newly installed closed loop cooling water sys- ture of safety and a healthy work environment are at the cen- tem will lead to a drastic reduction in annual cooling water de- ter of everything the company does. Sika has the ambitious mand from 2015 on. Continuous small-scale improvements also goal of every employee leaving the workplace healthy. The add up to contribute to the global increase in efficiency, such Group goal is: as in Argentina, where total water volume goes down by 75% thanks to a high-pressure cleaner requiring less water and to a Target – 5% less accidents per year: This refers to the filtration process that reuses service water in production. number of work-related accidents leading to injuries, covering all Sika employees, including temporary and subcontracted Extensive project case studies from around the globe detailing staff, at the company’s operating companies and units, both how Sika succeeded in saving water at its plants can be found at industrial and nonindustrial sites. Construction projects are not www.sika.com/sustainability. factored in.

Waste Implementation: The number of occupational accidents Efficient use of input materials is extremely important to all leading to lost work time of more than one day showed a year- Sika companies as production processes are material intensive on-year decrease. In the year under review, 11 occupational ac- using high volumes of nonrenewable resources. Efficient o- pr cidents per 1,000 employees (previous year: 12) were recorded. duction in this context means reducing and reusing production In 2014, injuries caused absences of an average of 17 days (pre- scrap, reducing and reusing packaging materials and improving vious year: 16). Sika will continue to improve safety constantly

Sika Annual Report 2014 Sustainability Report 52 in 2015: All plants will regularly run Safety Days and invest in technical safety measures. Depending on the situation and cultural context, local companies also include external partners to stage Safety Days, a case in point being Sika Thailand, which invited a Buddhist monk to address the topic of safety and re- ligion. Sika Vietnam conducted a safety campaign throughout the entire country to raise employee safety awareness and establish a safety-first work culture at production sites and offices. The subsidiary introduced an implementation program for teams, processed feedback and rewarded participants for strong achievements. Employees received training in first aid and dealing with chemical spills. At Sika UK, lean management and organizational structures, along with the introduction of safety management tools, helped to increase employees, safety awareness resulting in a stronger commitment on their part to improve the safety of their working environment.

Extensive project case studies from around the globe detailing how Sika was able to reduce occupational accidents and days lost at the plants can be found at www.sika.com/sustainability.

Sika Annual Report 2014 Sustainability Report 53 Employees Competence and Commitment

Sika believes in the competence and the entre- 5. Manage for Results: Sika is persistent in the pursuit of preneurial spirit of its employees and delegates its vision and targets and has a long-term view, taking pride decisions and responsibilities according to the in continuously achieving outstanding results. Functions and projects are clearly assigned because giving people respon- individual’s level of competence. Training and sibility guarantees success. Sika has transparent remunera- development of employees is given a high tion benchmarks following a defined strategy. Performance priority. Sika aims to provide training for all em- evaluation is based on market share, sales growth, profit- ployees, to develop tomorrow’s leaders and to ability and capital efficiency. focus on promoting internal candidates. Training and development

Values and principles Sika is proud to have a large number of long-serving employees. It sets great store by employees who stay with the company Sika introduced its five values and principles in 2014. The suc- and share their know-how and experience for as long as pos- cess of any company hinges not only on implementing the right sible. Sika regards internal and external training courses as key strategy, but also on harnessing the trust and commitment of development tools for its approximately 17,000 employees. The its employees. Sika’s rise to its leading global position is driven company also encourages more extensive training programs. by the five values and principles that define its corporate cul- Through its partnerships with distinguished universities, Sika ture. These are: is able to ensure that the training it provides incorporates the 1. Customer First: Sika designs all of its new products and latest industry trends and technological developments. In the solutions with its customers, success in mind. The company year under review, Sika spent a total of around CHF 8.3 million looks to build long-lasting and mutually beneficial relation- (previous year: CHF 7.1 million) on employee development. The ships rather than focus on short-term successes. This mind- aim is to provide at least ten hours training per year for each em- set is reflected in Sika’sB uilding Trust tagline. ployee. In 2014, the figure stood at 11.4 hours (2013: 10.6 hours). 2. Courage for Innovation: Innovation management is at the core of the company’s business. Sika has institutional- Management development ized its Product Creation Process with a strong focus on con- Sika gives preference to internal candidates for specialist and sistently developing new products, systems and solutions. management appointments. In the last two years, for example, 3. Sustainability & Integrity: Sustainability is a key com- Sika’s senior management roles have almost all been filled in- ponent of Sika’s drive for innovation. For buildings and indus- ternally. trial applications alike Sika aims to enhance durability and improve both energy and material efficiency. Sika’s aim is to Sika Business School reduce resource consumption within its own company as well The Sika Business School offers programs in the areas of man- as for its partners, who trust in Sika products. The well-being agement development and talent development. In the year un- and health of employees and partners is a prerequisite to the der review, the school ran 12 courses for junior managers. Sika company’s success. continued its partnership with the International Institute for 4. Empowerment & Respect: Sika fosters a working envi- Management Development (IMD) in Lausanne (Switzerland), ronment based on trust and respect. The company focuses the program on offer includes a course designed specifically for consistently on working in close partnership with each other the members of Group Management. and with customers, suppliers and stakeholders. Sika believes in the competence and the entrepreneurial spirit of its The Sika Business School lays particular emphasis on the area of employees. The company empowers its people to develop sales and marketing, offering numerous courses to develop the and propose new ideas, which is why decisions and responsi- sales force. Furthermore, many training courses on Sika prod- bilities are delegated to the level of competence. Corporate ucts and their applications take place at local and regional level. units are structured to be as decentralized as possible, with The company’s expertise in advising customers is thus fostered flat hierarchies and broad spans of control. worldwide.

Sika Annual Report 2014 Employees 54 Number of Employees Work region of Nationalities % of senior Sika’s senior managers managers The number of employees rose 3.7% during the year under review to 16,895 (2013: 16,293). In line with Sika’s growth strat- EMEA 27 39 egy, the emerging markets accounted for the majority of the APAC 16 19 512 people who joined the company. The regional distribution of LATAM 10 9 Sika employees is as follows: EMEA 8,708 (2013: 8,658), North NAM 5 7 America 1,488 (2013: 1,438), Latin America 2,609 (2013: 2,329), Corporate organization 10 27 Asia/Pacific 4,090 (2013: 3,868).

The age structure at Sika is broadly balanced: 17% of employees are under 30 years of age and 21% over 50. Sika wants to offer Women account for 22.3% of total headcount (2013: 21.5%) and its staff long-term prospects with the company and over 95% of 16.4% of managers (2013: 16.2%). Sika is constantly working to employees have permanent employment contracts. increase these figures.

Together, all Sika employees generated a net added value of CHF 1,715 million in 2014 (2013: CHF 1,542 million). This corre- Work and social standards sponds to net added value per employee of CHF 103,000 (previous year: CHF 98,000). Further information on this topic may be Sika companies and their employees comply with global and lo- found on page 133 of the pdf download of this report. cal work and social standards. Furthermore, all employees are bound by the Sika Code of Conduct, regardless of where they work and in which function. The Sika Code of Conduct is binding EMPLOYEES even in cases where local laws are less stringent. In addition, in thousand as a signatory of the UN Global Compact, Sika prepares its reporting in accordance with the GRI G4 guidelines. To ensure that , the interests of all stakeholders are represented and to reaffirm our commitment, Sika is also a member of the World Council for Sustainable Development. ,

The Sika Code of Conduct protects and ensures compliance with , human rights. The company respects the right to freedom of association. However, it must be noted that Sika also operates in countries where the right to freedom of assembly and to col- , lective bargaining are restricted by national legislation.

, Sika tolerates neither child labor nor any type of slavery and observes all laws and guidelines in respect of discrimination in any form. Sika actively promotes a recruitment policy aimed at , achieving a diversified workforce. Chapter 9 of Sika’s Code of Conduct establishes a zero tolerance approach to discrimination at the workplace.

Diversity Every year around 20 internal audits and 10 legal audits are conducted, corresponding to some 20% of all Sika national sub- Sika’s global presence and associated proximity to customers sidiaries. Among other things, these audits ensure compliance make it extremely important to integrate different cultures and with the applicable work and social standards. share information across national boundaries. The company firmly believes that the diversity experienced by employees on a daily basis is one of the factors of its success, especially at senior management level.

Sika Annual Report 2014 Employees 55 Corporate Governance

Sika Annual Report 2014 Employees 56 Corporate Governance Commitment to openness and transparency

Creating transparency is the highest objective The heads of the central services Finance and Research and De- of good corporate governance. This provides velopment are likewise members of Group Management, which information on structures and processes, consists of nine members. All Group business is consolidated in Sika AG, the holding company, itself in turn under the supervi- areas of responsibility and decision procedures sion of the Board of Directors. The organization structures are as well as rights and obligations of various presented on pages 22 to 28 of the download pdf of this report. stakeholders. Reporting at Sika follows the SIX Swiss Exchange guidelines. As of the balance sheet date of December 31, 2014, Sika had two significant shareholders with a share of voting rights of over 3%, the group formed by the Burkard-Schenker family and Compagnie de Saint-Gobain, Courbevoie, which according to information provided by the family as at Decem- Group structure and shareholders ber 31, 2014, holds 52.9% of all share votes, mainly through Schenker-Winkler Holding AG, Baar, and BlackRock, Inc., New Sika AG, headquartered in Baar, is the only listed Sika company. York, which held 3.25% of all voting shares on the balance The Sika AG bearer shares are listed on SIX Swiss Exchange sheet record date. A list of changes in significant sharehold- under Swiss security no. 58797. Information on Sika AG’s stock ings reported to the Disclosure Office of SIX Swiss Exchange market capitalization can be found on download pdf, page 18. Ltd during the year under review can be found at http://www. In the year under review, the Sika Group encompassed unlist- six-exchange-regulation.com/obligations/disclosure/major_ ed subsidiaries in 90 countries. 140 companies are included in shareholders_en.html. There are no crossover holdings exceed- the scope of consolidation. Companies of which Sika holds less ing 3%, either in terms of capital or votes. than 50% of shareholder votes are not consolidated. These are namely Addiment Italia S.r.l., Italy; Condensil SARL, France; Sarna Granol AG, Switzerland; Hayashi-Sika Automotive Ltd., Capital structure Chemical Sangyo Ltd. and Seven Tech Co. Ltd. in Japan as well as the joint venture Part GmbH in Germany. Detailed informa- As at December 31, 2014, capital stock totaled CHF 1,524,106.80. tion on the Group companies can be found on page 125 ff. of the This was divided into 2,151,199 bearer shares, each with a nomi- download pdf of this report. nal value of CHF 0.60, and 2,333,874 registered shares, each having a nominal value of CHF 0.10. All shares earn the same Sika conducts its worldwide activities according to countries dividend, with payout adjusted according to nominal value. One that have been classed into regions with area-wide manage- share represents one vote. In addition, there is CHF 155,893.20 rial functions. The heads of the regions are members of Group in contingent capital, unrestricted in time, comprising 259,822 Management. The regional and national management teams bearer shares with a per-share nominal value of CHF 0.60. bear full profit and loss responsibility, and – based on the Group These shares are reserved for the exercise of option or conver- strategy – set country-specific growth and sustainability tar- sion rights. Shareholders are excluded from subscription rights. gets, and allocate resources. There are currently no conversion or option rights outstanding. Sika granted no participation certificates, dividend right certifi- Furthermore, Sika has geared its internal organization toward cates or stock options. seven target markets from the construction industry or from industrial manufacturing. These target markets are represented Option plans do not exist for members of the Board of Directors, by two members of Group Management as well as in the regional Group Management or employees. Changes in capital stock, re- management teams and the national subsidiaries. The relevant serves and retained earnings during the last five years are post- managers are responsible for the definition and launch of new ed on page 130 ff. of the download pdf of this report. products, the implementation of demonstrated best practices, and the product-line and pricing policies for Group products, i.e. The purchase of Sika bearer and registered shares is open to all those offered worldwide rather than only in a particular country. legal persons and individuals. The Board of Directors can deny purchase of registered shares if the purchaser’s registered shareholdings exceed 5% of the total number of registered shares entered in the commercial register. Nominees, i.e. shareholders who acquire shares in their own name but on the account of third parties, are registered as shareholders without voting rights.

Sika Annual Report 2014 Corporate Governance 57 Board of Directors –– The Audit Committee mainly reviews the results of internal and external audits as well as risk management. The com- T he Board of Directors is Sika’s highest governing body and is mittee convenes at the request of its chairperson as required. mainly responsible for the: Customarily the Chairman of the Board and the CFO, as well –– Definition of the corporate mission statement and as the CEO if necessary, take part in these meetings in an ad- corporate policies visory capacity. In the year under review the Audit Committee –– Decisions on corporate strategy and organizational structure met five times. –– Appointment and dismissal of members of Group –– The Nomination and Compensation Committee prepares per- Management sonnel planning at Board and Group Management level and –– Structuring of finances and accounting handles matters relating to compensation. One of the cen- –– Establishment of medium-term planning as well as the tral tasks of the Nomination and Compensation Committee annual and investment budgets. is succession planning for the Board of Directors and Group Management. The committee convenes at the request of its The members of the Board of Directors are elected by the An- chairperson as required. Usually the Chairman of the Board nual General Meeting for a term of office of one year. They can and the CEO participate in these meetings in an advisory be reelected at any time. Upon reaching the age of seventy, di- capacity, insofar as they are not themselves affected by the rectors resign their mandate. Detailed information on individual items on the agenda. In the year under review the Nomination members of the Board of Directors is listed on page 27 of the and Compensation Committee met six times. download pdf of this report. No directorships are maintained with other listed companies on a reciprocal basis. Group Management

Presently the Board of Directors of Sika AG consists of nine Within the framework of Board resolutions, Sika’s operative members. None of the members of the Board of Directors was leadership is incumbent on Group Management. The structure a member of Group Management or the executive management of the Group Management is outlined in the beginning of the of a Group company during the three preceding business years. Corporate Governance, on page 57 of the download pdf of this The Board convenes at the Chairman’s request as business de- report. The members of Group Management and their functions mands. In business year 2014 the Board met eight times. The are listed on pages 23 to 26 of the download pdf of this report. Chief Executive Officer (CEO) participates in the Board meetings Detailed information on their backgrounds and activities can be in an advisory capacity. The other members of Group Manage- found on pages 24 to 25 of the download pdf of this report. Sika ment take part as necessary, but at least three times per year, had no management contracts with third parties in the year un- also in an advisory capacity. Company officers report regularly der review. and comprehensively to the Chairman concerning implementation of Board decisions. Shareholder participation rights

The CEO as well as the CFO report to the Board in writing on Every shareholder can exercise share votes through representa- the development of business at least once per month. Extraor- tion by another shareholder with voting rights or the indepen- dinary occurrences are reported immediately to the Chairman or dent proxy. the Audit Committee, insofar as such events relate to the latter’s area of responsibility. The Internal Audit staff report to the Information on what constitutes a statutory quorum can be Chairman as well as the Audit Committee within the scope of found in art. 704 of the Swiss Code of Obligations (CO); infor- the review schedule. mation on what constitutes a quorum under Sika’s articles of association can be found in § 15 paragraph 3 of the latter docu- Board committees ment. The orders of business for which a majority is required are defined therein. Sika’s articles of association can be found Sika has two committees of the Board of Directors: the Audit at http://www.sika.com/en/group/investors/corporategover- Committee as well as the Nomination and Compensation Com- nance/articlesofassociation.html. The invitation modalities and mittee. The chairpersons of these committees are elected by deadlines for the Annual General Meeting are conformant with the Board. Otherwise, the committees organize themselves. In- legal requirements. In addition, during a period published by the formation on the members of the committees can be found on company, shareholders representing a nominal share value of page 27 of the download pdf of this report. CHF 10,000 can request in writing to have an item placed on the agenda, indicating the proposals to be put forward.

Sika Annual Report 2014 Corporate Governance 58 Notice is published in the Swiss Official Gazette of Commerce. In 2014, the present auditor took part in three meetings of the New registered shares will not be registered by the company Audit Committee. in the two working days prior to the Annual General Meeting. Therefore registered shares sold between the deadline and the Ernst & Young AG billed CHF 3.5 million for its services during Annual General Meeting are not entitled to vote. the year under review. This figure included the audits of individual closings within Sika AG as well as of practically all subsidiaries and the review of the consolidated financial state- Delineation of powers of ments. Ernst & Young AG received additional fees totaling authorization CHF 1.0 million for tax consultancy and CHF 0.6 million for audit- related consulting services. The powers of authorization, duties and responsibilities of the Board of Directors and Group Management are laid down in the Information policy organizational rules of Sika AG and Sika Group (http://www.sika.com/en/group/investors/CorporateGover- Sika informs extensively on the development of business in an- nance/organizational_rules.html). nual and quarterly reports, at the annual media and financial analyst conference as well as at the Annual General Meeting. The continually updated website at www.sika.com as well as media Change in corporate control and releases regarding important developments are also integral defense measures components in communications. As a company listed on SIX Swiss Exchange, Sika is also obligated to comply in particular In accordance with § 6 of the Sika articles of association, pur- with requirements of ad-hoc disclosure, i.e. the release of news chasers of shares are not obligated to make a public offering as which may affect its stock price. In addition, Sika maintains generally prescribed by articles 32 and 52 of the Swiss Federal dialog with investors and the media through special events Act on Stock Exchanges and Securities Trading. There are no and road shows. Information on important dates in 2015 can be clauses governing changes in corporate control. found on page 145 of the download pdf of this report. Auditor

The auditor of Sika AG is elected by the Annual General Meeting for a term of one year. In the year under review, Ernst & Young AG, listed as an auditor in the commercial register since Febru- ary 7, 1995, served in this capacity. In accordance with legal requirements, the auditor in charge is replaced after a maximum period of seven years. The auditor in charge has been responsible for the audit mandate since 2010.

The auditor participates regularly in the meetings of the Audit Committee, providing oral and written report of the results of its reviews. The Audit Committee checks and evaluates the auditor and makes recommendations to the Board of Directors. The evaluation of performance and the negotiation of fees are conducted according to internally specified criteria.

Sika Annual Report 2014 Corporate Governance 59 Compensation Report

2.1 einleitung des Präsidenten des Nominierungs- und Vergütungsausschusses 4

2.2 vergütungspolitik 6

2.3 Festsetzungsverfahren für Vergütungen 12

2.4 vergütung der Verwaltungsräte 15

2.5 vergütung des CEO und der Mitglieder der Konzernleitung 20

2.6 Vvergütung für den CEO und die Konzernleitung für

das Geschäftsjahr 2013 Sika Annual Report 2014 20 Corporate Governance 60 Compensation Report

The Compensation Report describes the compensation principles and programs as well as the governance framework related to the compensation of the Board of Directors and the members of Group Management of Sika. The report also provides details around the compensation programs and the payments made to members of the Board of Directors and of Group Management in the 2014 business year.

The Compensation Report is written in accordance with the Ordinance against Excessive Remuneration in Stock Listed Corpora- tions, the principles of the Swiss Code of Best Practice for Corporate Governance of economiesuisse and the standard relating to information on Corporate Governance of the SIX Swiss Exchange. It has the following structure:

Introduction by the Chairman of the Nomination and Compensation Committee 62 Compensation governance 63 Architecture of compensation of the members of Board of Directors 67 Architecture of compensation of members of Group Management 68 Compensation awarded to the Board of Directors in 2014 (audited) 72 Compensation awarded to the CEO and to Group Management in 2014 (audited) 73 Shareholdings of members of Board of Directors and Group Management in 2014 74 Changes foreseen for 2015 75 Report of the statutory auditor 76

Sika Annual Report 2014 Compensation Report 61 Introduction by the Chairman of the Nomination and Compensation Committee

Dear Shareholders,

In the name of the Board of Directors and the Nomination and Compensation Committee, I am pleased to present the 2014 Com- pensation Report.

2014 has been an outstanding year for Sika, with an 8.3% revenue growth in Swiss francs (13% in local currencies) and 21% profitability increase (earnings before interest and tax). All regions posted very strong results, and the emerging markets continued their accelerated development with the opening of new factories. In terms of relative performance, Sika outperformed its peers both in terms of sales growth and profitability improvement. The compensation report explains how these results impacted the variable incentive payments made to the members of Group Management under the different compensation plans.

In the reporting year, the Nomination and Compensation Committee focused its efforts on the implementation of the Ordinance against Excessive Remuneration in Stock Listed Corporations (the Ordinance).

First of all, the Articles of Association have been amended in order to comply with the Ordinance. The Articles of Association now include provisions on the responsibilities of the Nomination and Compensation Committee and on the principles of compensation applicable to the Board of Directors and Group Management. You approved the revised Articles of Association at the 2014 Annual General Meeting.

Further, we conducted our first binding vote on the aggregate maximum compensation amounts for the Board of Directors and for the Group Management at the 2014 Annual General Meeting, one year ahead of the requirements of the Ordinance. We also conducted a consultative vote on the Compensation Report, so that shareholders could express their opinion on our compensation policy and principles. We believe that the combination of the prospective binding vote on the compensation amounts and the consultative vote on the Compensation Report provides our shareholders with a real say-on-pay and we will continue to take this approach in the future.

During the summer, we undertook a thorough review of our compensation policy and programs and concluded that they are well aligned to our business strategy and to the long-term shareholders, interests, while being compliant with the various regulations and corporate governance principles. Therefore, we decided to not undertake any fundamental changes, but rather to continue to strengthen our compensation principles with the extension of the Long-Term Incentive plan to the Sika Senior Managers (by definition, management level reporting into Group Management).

Finally, we expanded our disclosure in the Compensation Report, so that you can clearly assess the link between the performance achieved in the reporting year and the compensation paid out under the different incentive plans.

Looking ahead, we will continue to assess and review our compensation programs to ensure that they are still fulfilling their purpose in the evolving context in which the company operates. We will also continue to maintain an open dialog with our shareholders and their representatives.

We would like to thank you here for sharing your perspectives on executive compensation with us and trust that you will find this report informative.

Sincerely,

Frits Van Dijk Chairman of the Nomination and Compensation Committee

Sika Annual Report 2014 Compensation Report 62 Compensation Governance

Nomination and Compensation Committee In accordance with the Articles of Associations and the organizational regulations of Sika AG, the Nomination and Compensation Committee is composed of three members of the Board of Directors that are elected individually by the Annual General Meeting for a period of one year. Since the Annual General Meeting of 2014, Mr. Frits van Dijk (Chairman), Mr. Urs Burkard and Mr. Daniel Sauter are members of the Nomination and Compensation Committee.

It is the responsibility of the Nomination and Compensation Committee to: –– review and determine the compensation policy, including the principles for the variable compensation and shareholding programs according to the provisions specified in the Articles of Association; –– propose to the Board of Directors the maximum aggregate amounts of compensation of the Board of Directors and of Group Management to be submitted to the shareholders, vote at the Annual General Meeting; –– propose to the Board of Directors the compensation level for the members of the Board of Directors, the CEO and the other members of the Group Management, within the maximum aggregate compensation amounts approved by the Annual General Meeting; –– provide the Board of Directors with a performance assessment of the CEO and of the other members of Group Management, together with a recommendation for the short-term and long-term incentives to be awarded to them based on their individual performance and the performance of the company; –– propose to the Board of Directors the Compensation Report; –– prepare the succession planning of the CEO and other members of Group Management, and propose to the Board of Directors the appointment of new members of Group Management.

Levels of authority

CEO Chairman NCC BoD AGM of the BoD

Compensation policy and principles Proposes Approves Maximum aggregate compensation Proposes Reviews Approves (binding amounts of BoD and GM vote) Compensation of Chairman of the BoD Decides Informed Individual compensation of members Proposes Approves of the BoD Compensation of CEO Proposes Reviews Approves Individual compensation of members Proposes Reviews Approves of GM Compensation Report Proposes Approves Consultative vote

BoD = Board of Directors, NCC = Nomination and Compensation Committee, GM = Group Management, AGM = Annual General Meeting

Sika Annual Report 2014 Compensation Report 63 In 2014, the Nomination and Compensation Committee held six meetings according to the following predetermined annual agenda:

Jan Feb Apr Jul Oct Dec

Compensation strategy Review of overall compensation policy • Review of overall compensation policy Review of committee duties, accountabilities and responsibilities • Preparation and approval of Compensation Report • • Preparation of say-on-pay vote for next Annual General Meeting • Review of external stakeholder feedback on compensation disclosure • Review of compensation disclosure principles • Compensation of Board of Directors Determination of compensation for following compensation period • Compensation of Group Management Preliminary performance evaluation (previous year) • Final performance evaluation (previous year) • Determination of Short-Term incentive pay-out for previous year • Determination of Long-Term Incentive vesting (previous performance period) • Preliminary compensation review for following year • Determination of compensation (at target) for following year • Determination of performance objectives for following year • Nomination items Review of Board constitution • Review of potential candidates to positions on the BoD • Succession planning for Group Management positions •

The Chairman of the Nomination and Compensation Committee reports to the Board of Directors after each meeting on the activities of the Committee. The minutes of the Committee meetings are available to the members of the Board of Directors. As a general rule, the Chairman of the Board of Directors and the CEO attend the meetings in an advisory capacity. They do not attend the meeting when their own compensation and/or performance are being discussed. In 2014, Frits van Dijk and Daniel Sauter attended all six meetings, while Urs Burkard attended five meetings and apologized for one meeting. This corresponds to an overall attendance rate of 94%.

The Nomination and Compensation Committee may decide to consult an external advisor from time to time for specific compensation matters. In 2014, Agnès Blust Consulting was mandated to provide services related to executive compensation matters and Towers Watson was mandated to perform a benchmarking analysis of the compensation of Group Management. These external advisors do not have other mandates with Sika. In addition, support and expertise are provided by internal compensation experts such as the Head of Human Resources and the Head of Compensation & Benefits.

Shareholders, involvement With the implementation of the Ordinance, the role of shareholders in compensation matters has been strengthened substantially. On the one hand, the compensation amounts of the Board of Directors and Group Management are subject to a yearly binding vote at the Annual General Meeting. On the other hand, the Articles of Association must include the principles on compensation applicable to the Board of Directors and Group Management. The amendments to the Articles of Associations have been presented and approved by the shareholders at the 2014 Annual General Meeting and are summarized below (please refer to www.sika.com/en/ group/investors/CorporateGovernance/ArticlesOfAssociation.html for the full version of the Articles of Association): –– principles of compensation applicable to the Board of Directors (art. 11.1, 11.3 and 11.8): The Board of Directors receives fixed compensation in cash and/or in shares;

Sika Annual Report 2014 Compensation Report 64 –– principles of compensation applicable to the Group Management (art. 11.1, 11.4 to 11.6 and 11.8): The Group Management receives a fixed and a variable compensation.T he variable compensation consists of a performance bonus paid in cash and in shares (share purchase plan), and of a long-term incentive in form of equity compensation. For the CEO, the variable compensation (value of paid out performance bonus and grant value of the long-term incentive) does not exceed 300% of the fixed compensation. For the other members of Group Management in total, the variable compensation does not exceed 200% of the fixed compensation; –– binding vote by the Annual General Meeting (art. 11.2): The Annual General Meeting approves annually the total fixed remuneration amount of the Board of Directors for the period until the next ordinary General Meeting, and the maximum total fixed and variable compensation amount of the Group Management for the next fiscal year; –– additional amount for new members of Group Management (art. 11.7): The total additional compensation for each new member of Group Management may not exceed the average total compensation of the Group Management in the previous fiscal year by more than 200%, resp. 400% for a new CEO. Proven disadvantages from the change of position may be compensated within this additional amount; –– credit, loans and post-employment benefits (art. 12):T he company does not offer any loans, credit, guarantees or other securities to members of the Board of Directors and Group Management. Pension benefits are offered only in accordance with the occupational pension plans, which are specified in the respective regulations.

In addition, the compensation report is submitted to a consultative shareholders’ vote, so that shareholders can express their opinion on the compensation policy and programs.

Method of determination of compensation Periodic benchmarking The compensation of the Board of Directors is regularly reviewed against prevalent market practice of other multinational industrial companies. In 2012, a thorough review had been conducted in order to determine the competitiveness of the Board compensation in terms of structure and overall level. For this purpose, a peer group of Swiss multinational companies of the industry sector listed on the Swiss Stock Exchange (SIX) was selected for the benchmarking analysis. The peer group consists of Clariant, Geberit, Georg Fischer, Holcim, Lonza, Schindler, Sonova and Sulzer and is well-balanced in terms of market capitalization, revenue size and headcount. This compensation review resulted in a fundamental change of the compensation model for the Board of Directors, effective 2012. Consequently, no further analysis and no further adjustments were made in 2013 and 2014.

Regarding the compensation of the Group Management, a compensation review was conducted again in 2014, with the support of an independent consultant, Towers Watson. The same peer group of companies has been chosen as for the review of compensation of the Board of Directors. Towers Watson gathered the relevant benchmarking data through a so-called club survey and summarized them in a report that served as basis for the Nomination and Compensation Committee to analyze the compensation of the CEO and the Group Management, and to set their target compensation levels for the financial year 2015.

Peer group for benchmarking purposes as of 12/31/2014

Market capitalization Revenue Headcount

Sika 7,457 5,571 16,895 1st quartile 5,135 3,036 9,739 Median 7,308 3,670 14,592 3rd quartile 13,538 6,775 24,744

Sika Annual Report 2014 Compensation Report 65 P erformance Management The actual compensation paid to the individual members of Group Management in a given year depends on the company and on the individual performance. Individual performance is assessed through the annual Performance Management process, which aims to align individual and collective objectives, to stretch performance and to support personal development. The objectives for the CEO and members of Group Management are approved by the Nomination and Compensation Committee at the beginning of the financial year and achievement against those objectives is assessed at year-end. The performance assessment of the members of Group Management is conducted by the CEO, while that of the CEO is conducted by the Chairman of the Board of Directors. The Nomination and Compensation Committee reviews the performance assessment of the CEO and the other members of Group Management before submitting them to the Board of Directors for approval. In discussing performance, the Nomination and Com- pensation Committee deliberates on the achievement of the individual objectives of each member of Group Management. The Committee also considers the extent to which individuals have carried out their duties in line with company values and expected leadership behavior. The individual performance assessments, together with the company’s performance, form the basis for the determination of incentive pay-out levels.

Compensation principles Compensation of the Board of Directors In order to guarantee the independance of the members of the Board of Directors in exercising their supervisory duties, their compensation consists of a fixed remuneration only.

Compensation of the Group Management Sika’s compensation programs reflect a commitment to attract, develop and retain qualified, talented and engaged executives. They are designed to motivate executives to achieve the overall business objectives and to create sustainable shareholder value. The compensation programs are based on the following principles:

Pay for performance and sustainable success Compensation of Group Management is linked to Sika’s performance and to individual performance. Through a well-balanced combination of incentive programs, both the annual performance and long-term success are being rewarded.

Alignment with shareholder interests A significant portion of compensation is delivered in the form of restricted shares to align the interests of executives with those of the shareholders.

Market competitiveness Compensation is regularly benchmarked and is in line with competitive market practice.

Transparency Compensation programs are straightforward and transparent.

Sika Annual Report 2014 Compensation Report 66 The compensation programs include key features that align the interests of executives with those of shareholders and are in line with good practice in corporate governance.

What we DO What we Don’t Do • Conduct an annual review of the compensation policy and • P rovide discretionary compensation payments programs • Reward inappropriate or excessive risk taking or short-term • Maintain compensation plans with a strong link between pay profit maximization at the expense of the long-term health and performance of the company • C onduct a rigorous performance management process • P ay dividend equivalents on performance-contingent de- • Maintain compensation plans designed to align executive ferred units that have not been earned yet based on com- compensation with long-term shareholders’ interest pany’s performance • Offer employment contracts with a notice period of maxi- • Guarantee future base salary increases, non-performance mum 12 months based incentive payments or unrestricted equity compensation • Have prearranged individual severance agreements or special change-in-control compensation agreements

Architecture of compensation of members of the Board of Directors

In order to ensure their independence in their supervisory duties, the members of the Board of Directors receive a fixed compensation only, consisting of a retainer for services to the Board and an additional fee for assignments to committees of the Board. The retainer is paid partially in cash and partially in restricted shares, while the committee fees are paid in cash. The restricted shares are blocked from trading for a period of four years. The restriction on the shares may lapse in case of change of control or liquidation. The shares remain blocked in all other instances.

The cash payment and the shares are transferred shortly after the Annual Shareholders Meeting for the previous year of office, being defined as the period betweenA nnual General Meetings.

The members of the Board of Directors receive no additional reimbursements of business expenses beyond actual expenditures for business travel. The members of the Board do not participate in Sika’s employee benefit plan.

Structure of Board Compensation in CHF in cash in shares Retainer (gross p.a.) Chairman of the Board of Directors individually determinded individually determinded Members of the Board of Directors 150,000 50,000* Committee fees (gross p.a.) Committee Chairman 50,000 Committee Members 30,000

* Converted into shares on the basis of the closing share price shortly before the beginning of the year of office. Shares are transferred to the member shortly after the end of the year of office.

The compensation of the Chairman of the Board of Directors is defined individually, based on the person’s skills and experience, and includes the following components: an annual retainer, paid partially in cash (monthly) and partially in shares (after the Annual General Meeting for the previous year of office), and a representation allowance paid in cash (monthly). The Chairman of the Board of Directors is not eligible for committee fees. The Vice Chairman of the Board of Directors receives the retainer of CHF 150,000 and is eligible to an additional compensation in the amount of CHF 5,000 per day if additional work is required, for example to step in in the absence of the Chairman of the Board of Directors.

Sika Annual Report 2014 Compensation Report 67 Architecture of compensation of members of Group Management

Compensation model and compensation elements The compensation for members of Group Management includes the following elements: –– Fixed base salary –– Variable compensation: short-term and long-term incentives –– Benefits & perquisite

Structure of Group Management

Vehicle Purpose Drivers Performance measures Annual base salary Monthly cash salary Attract and retain Position, market practice Skills and experience

Performance bonus Annual bonus Pay for performance Achievement of business Group EBIT and net sales (Short-Term Paid in cash and in and individual objectives Individual objectives Incentive) restricted shares over a 1-year period Long Term Incentive Performance Share Unit Reward long-term Achievement of a Group ROCE with 3-year performance performance objective over a 3-year vesting and additional Align to shareholder period 4-year blocking period on interests the resulting shares Benefits Pension and insurances Protect against risks Market practice Perquisites Attract and retain Markect practice and Position

Fixed annual base salary Annual base salaries are established on the basis of the following factors: –– Scope, size and responsibilities of the role, skills required to perform the role; –– External market value of the role; –– Skills, experience and performance of the individual in the role. To ensure market competitiveness, base salaries of the members of Group Management are reviewed every year taking into consideration company’s affordability, benchmark information, market movement, economic environment and individual performance.

Performance bonus (Short-Term Incentive) The performance bonus is a short-term variable incentive designed to reward the collective performance of the company (“Group performance”) and individual performance (“Individual performance”) of the incumbent, over a time horizon of one year. This variable compensation allows employees to participate in the company’s success while being rewarded for their individual performance.

The performance bonus target is expressed as percentage of base salary and amounts to 100% for the CEO and ranges from 45% to 86% for the other members of Group Management. Group performance accounts for 60% of the total bonus, while the achievement of individual objectives accounts for 40%.

Group performance The performance measures for the Group performance are proposed by the Nomination and Compensation Committee and approved by the Board of Directors. For 2014, they were the same as in the previous year: –– EBIT (earnings before interest and tax) improvement during the year, relative to a peer group of companies; –– Net sales growth during the year, relative to the same peer group. EBIT improvement is weighted twice as much as net sales growth.

EBIT and net sales performance are measured based on an evaluation provided by an independent consulting firm, Obermatt. This benchmark compares and ranks Sika amongst the performance of a selected peer group of 24 companies, all industrial firms which were chosen because they have a comparable base of products, technology, customers, suppliers or investors and are thus exposed to similar market cycles.

Sika Annual Report 2014 Compensation Report 68 Peer Group (Obermatt benchmark)

3M – Industrial & Transportations Dow – Coating & Infrastructure Huntsman – Performance Products Armstrong World Industries Inc. EMS Chemie Holding AG Owens Corning Ashland – Performance Materials Forbo – Flooring Systems Pidilite Industries Limited BASF – Functional Solutions Fuller HB Company RPM Beacon Roofing Supply, Inc. Geberit Saint Gobain – Construction Products Beiersdorf – Tesa Grace – Construction SK Kaken Co., Ltd. Carlisle – Construction Materials Henkel – Adhesive Technologies Sto AG Cemedine Co., Ltd. Hilti Corporation Uzin Utz AG

Peer Group changes in 2014: due to changes in reporting, the Consumer and Craftsmen Adhesives and Industrial Adhesives divisions within Henkel were combined into Henkel Adhesive Technologies. The divisions Consumer Segment and Industry Segment of RPM were combined into RPM. In order to keep a reasonable number of peers, Geberit was added in the peer group.

The intention is to reward the relative performance of the company rather than its absolute performance because absolute performance may be strongly impacted by market factors that are outside the control of senior management. For both EBIT and net sales, the objective is to reach at least the median performance of the peer group, which corresponds to a 100% pay-out factor. There is no pay-out for any performance below the lower quartile of the peer group. Performance at the lower quartile of the peer group corresponds to a payout factor of 50%. Performance at the upper quartile leads to a 150% pay-out factor and being the best in the peer group leads to a 200% payout factor. Any pay-out factor between those levels is interpolated linearly.

Individual performance The individual performance includes personal objectives that are set as part of the annual performance management process. For the CEO and for the other members of Group Management, they are reviewed and approved by the Nomination and Compensation Committee. The personal objectives are mainly of financial nature, are clearly measurable and are set in three different categories: –– Bottom line contribution: profitability of the business under responsibility (EBIT target expressed as an improvement versus previous year); –– Return on invested capital: net working capital of the business under responsibility (NWC target expressed as an improvement versus previous year); –– People and projects management: includes strategic objectives, such as for example entry into new markets, introduction of new products, improvement of processes and operational efficiency, and leadership objectives.

At the end of the financial year, the actual achievement is compared with the targets that were set at the beginning of the year.T he level of achievement for each objective determines a pay-out percentage for that target, which is always between 0% and 200%.

The overall bonus payout under the Short-Term Incentive is capped and cannot exceed 150% of the bonus target. The bonus is paid out in April of the following year.

Overview of performance objectives CEO, Regional heads corporate functions

Performance • Relative group • EBIT improvement (2/3) 40% 40% bonus performance relative to peer group Net sales growth (1/3) 20% 20% relative to peer group

• Individual performance • Bottom line / profitability 20% (EBIT Group) 20% (EBIT Region) Net working capital 10% (NWC Group) 10% (NWC Region) People & Projects 10% 10%

Sika Annual Report 2014 Compensation Report 69 Sika Share Purchase Plan Under the Sika Share Purchase Plan (SSPP), the members of Group Management must convert part of the performance bonus into Sika shares with a blocking period of four years. The objective of this program is to encourage members of Group Management to directly participate in the long-term success of the company and to strengthen the link between their compensation and the company performance, as they are exposed to the change in share value over the blocking period of four years. In return, Sika provides one matching share for every five shares purchased under the SSPP. The SSPP requires at least 20% of the performance bonus to be deferred in shares. The participant may voluntarily defer a further 20% of the bonus into shares, therefore 40% in total.

The shares are allocated at their fair market value, shortly after the Annual General Meeting in the month of April of the following year. Fair market value is defined as the average closing share price during the five first trading days of the month of April of the pay-out year. The calculation of the share grant is made as follows:

Calculation of the number of shares granted

Deferred percentage Bonus amount 1.2 (matching share one Average closing share Number of shares of bonus × × for five) : price of five first trading = purchased (20% or 40%) days in April

In case of change of control or liquidation or of termination of employment due to retirement, death or disability, the blocking period of the shares is accelerated. The shares remain blocked in all other instances.

Long-Term Incentive Sika’s compensation policy is to also align a significant portion of compensation of GroupM anagement to the long-term company’s performance. Members of Group Management are eligible for a long-term equity incentive.

The Long-Term Incentive target amounts to 120% of annual base salary for the CEO and ranges from 49% to 86% for the other members of Group Management.

The Long-Term Incentive plan is a performance share unit plan. At the beginning of the vesting period, a number of Performance Share Units (PSU) are granted to each member of Group Management. The PSU vest after a period of three years, under a performance condition, the Return On Capital Employed (ROCE). The ROCE target is determined at the beginning of the vesting period by the Board of Directors and is measured at the end of the vesting period as the average ROCE of the first year, the second year and the third year of the vesting period. Acquisitions are excluded of the ROCE calculation in the year of acquisition and for two additional calendar years.

The final share allocation is determined after the three-year performance period, based on the following vesting rules: –R– OCE at or above target: 100% of the PSU vest into shares –R– OCE at threshold level: 50% of the PSU vest into shares and 50% of the PSU forfeit –R– OCE between threshold and target levels: linear interpolation –R– OCE below the threshold level: 0% of PSU vest into shares (100% forfeiture). There is no overachievement in the long-term incentive, so the maximum pay-out is 100%.

For the grant made in 2014 (performance period 2014–2016), the ROCE target was set at 20%, excluding acquisitions, and the threshold was set at 18%.

The shares are allocated at their market value (closing price at grant date on the SIX Swiss Exchange), shortly after the annual shareholder meeting in the month of April following the three-year vesting period. In some countries where the allocation of shares may be illegal or impractical, the award may be settled in cash after the performance period.

Sika Annual Report 2014 Compensation Report 70 Long-Term Incentive plan period

LTI Plan Performance Period

Plan year 2014 Plan year 2015 Plan year 2016 Blocking period 2017–2021

Grant date Vesting Pay-out date Unblocking date Number of PSU Number of shares Shares are free 0 to 100%

ROCE measurement

The shares have a blocking period of four years, during which they are excluded from trading. In case of termination of employment due to retirement, death, disability, or in case of liquidation or change of control, the blocking period of the shares is accelerated. The unvested PSU are subject to an early vesting, pro-rated for the period of the plan that was effectively worked, and based on an achievement payout of 75%. In case of termination for any other cause, such as resignation or involuntary termination, the shares remain blocked and the unvested PSU forfeit.

Benefits: Pensions As the Group Management is international in its nature, the members participate in the benefits plans available in the country of their employment contract. Benefits consist mainly of retirement, insurance and health-care plans that are designed to provide a reasonable level of protection for the employees and their dependents in respect to the risk of retirement, disability, death and health.

The members of Group Management with a Swiss employment contract participate in Sika’s pension plans offered to all employees in Switzerland. These consist of the pension fund of Sika Schweiz AG, in which base salaries up to an amount of CHF 133,380 per annum are insured, as well as a supplementary plan in which base salaries in excess of this limit are insured up to the maximum amount permitted by law. Sika’s pension funds exceed the legal requirements of the Swiss Federal Law on Occupational Retire- ment, Survivors and Disability Pension Plans (BVG).

Members of Group Management under foreign employment contracts are insured commensurately with market conditions and with their position. Each plan varies in line with the local competitive and legal environment and are, as a minimum, in accordance with the legal requirements of the respective country.

Moreover, an early retirement plan is in place for members of the top management of Sika. The plan, entirely financed by the employer, is administered by a Swiss foundation. Beneficiariesmay opt for early retirement from the age of 60, provided that they have been in a top management position for at least five years. Benefits under the plan are twofold: –– Fixed pension payment until the age of legal retirement. The amount of pension depends on the last fixed salary and the actual age at early retirement. –– Partial financing of the reduction in the regular pension due to early retirement. The amount which may be received as life-long pension payment or as a capital contribution depends on the actual age at early retirement and benefits already accrued in existing pension plans. This portion of the plan is only applicable to beneficiaries insured under a Swiss pension plan.

Benefits: perquisites Members of Group Management are also provided with certain executive perquisites such as a company car allowance and other benefits in kind, according to competitive market practice in their country of contract.T he monetary value of these other elements of compensation is evaluated at fair value and is disclosed in the compensation tables.

Employment contracts The members of Group Management are employed under employment contracts of unlimited duration and are all subject to a notice period of one year. Members of Group Management are not contractually entitled to termination payments.

Sika Annual Report 2014 Compensation Report 71 Compensation awarded to the Board of Directors in 2014

This section is audited according to article 17 of the Ordinance against Excessive Remuneration in Stock Listed Corporations.

In 2014, the members of the Board of Directors received a total compensation of CHF 2.8 million (2013: CHF 2.8 million) in the form of retainer of CHF 1.6 million (2013: CHF 1.6 million), committee fees and other expenses of CHF 0.3 million (2013: CHF 0.3 million), social security contributions of CHF 0.2 million (2013: CHF 0.2 million) and shares of CHF 0.7 million (2013: CHF 0.7 million).

The amounts for the retainer in cash and the committee fees have remained unchanged since 2012. Due to the increase in the share price during the last few years, it has been decided to grant the restricted shares based on a fixed amount in Swiss francs rather than on a fixed number of shares, effective for the compensation period starting after the 2014A nnual General Meeting (AGM). The number of shares granted to the members of the Board of Directors corresponds to CHF 50,000 and to CHF 300,000 for the Chair- man of the Board of Directors, converted on the basis of the closing share price shortly before the beginning of the year of office (April 11, 2014). The shares will be transferred to the members at the end of the year of office, shortly after the AGM in April 2015.

in CHF Retainer Commit- Value of Social Total 2014 Retainer Commit- Value of Social Total 2013 tee fee1 shares2 security tee fee1 shares2 security

Paul Hälg, 480,000 30,000 299,872 57,543 867,415 506,667 30,000 358,830 60,899 956,395 Chairman Jürgen Tinggren, 100,000 0 34,540 10,214 144,754 0 0 0 0 0 Vice Chairman3 Urs F. Burkard, 150,000 30,000 53,026 17,690 250,716 150,000 30,000 53,586 18,100 251,686 NCC Member Willi K. Leimer, 150,000 30,000 53,026 17,690 250,716 150,000 30,000 53,586 17,687 251,273 AC Member Monika Ribar, 150,000 50,000 53,026 19,153 272,179 150,000 50,000 53,586 19,155 272,741 AC Chairman Christoph Tobler, 150,000 30,000 53,026 17,690 250,716 150,000 30,000 53,586 17,682 251,268 AC Member Daniel J. Sauter, 150,000 30,000 53,026 17,690 250,716 150,000 30,000 53,586 13,945 247,531 NCC Member Ulrich W. Suter 150,000 3,333 53,026 12,998 219,357 150,000 10,000 53,586 13,574 227,160 Frits van Dijk, 150,000 50,000 53,026 16,121 269,147 150,000 33,333 53,586 14,715 251,634 NCC Chairman Thomas W. Bechtler, 0 0 0 0 0 50,000 26,667 16,614 6,974 100,255 NCC Chairman4 TOTAL 1,630,000 253,333 705,594 186,790 2,775,718 1,606,667 270,000 750,546 182,730 2,809,942 1) For the chairman of the Board of Directors, includes the representative allowance. 2) Fair market value is defined as the closing price on April 17, 2013 resp. April 11, 2014 3) Member since AGM of April 15, 2014 4) Member until AGM of April 16, 2013

In the year under review, no compensation was paid to former members of the Board of Directors. No compensation was paid to parties closely related to members of the Board of Directors.

No member of the Board of Directors was granted a loan during the reporting year. No loans were outstanding at the end of the year under review.

Sika Annual Report 2014 Compensation Report 72 Compensation awarded to the CEO and to Group Management in 2014

This section is audited according to article 17 of the Ordinance against Excessive Remuneration in Stock Listed Corporations.

In 2014, the members of the Group Management received a total compensation of CHF 16.8 million (2013: CHF 16.2 million). This amount comprises fixed salaries of CHF 4.8 million (2013: CHF 4.7 million), short-term bonus of CHF 5.4 million (2013: CHF 5.2 million), long-term incentives of CHF 3.7 million (2013 restated: CHF 3.4 million), other expenses of CHF 1.1 million (2013 restated: 1.1 million) and contributions to social security and post-employment benefits ofC HF 1.8 million (2013 restated: CHF 1.8 million).

CHF in thousand CEO 2014 CEO 2013 Total 2014 Total 2013

Fixed base salary1 808 808 4,797 4,728 Performance bonus (STI) cash2 960 954 4,148 3,442 Performance bonus (STI) shares2 288 286 1,301 1,768 Long-term incentive3 960 960 3,669 3,405 Other payments4 46 46 1,113 1,074 Pension benefits5 334 320 1,797 1,769 TOTAL 3,396 3,373 16,825 16,187 1) Includes annual base salary, children/family allowances, and anniversary payments. All compensation amounts are gross payments 2) Estimated performance bonus (STI) of the reporting year that will be paid in April 2015, splitted between immediate cash and deferred shares (including matching shares) 3) Grant value of the grant in the reporting year (2013 restated, as disclosure was previously based on accruals). For new members in 2014, includes additional pro rata grants in the unvested plans (LTI 2012–2014, LTI 2013–2015) 4) Includes all other benefits in kind and perquisites at fair value, including cost allowances (tax equilization, housing, schooling, home leave) for the international assignees (2013 restated, as the cost allowances were not included in previous disclosures) 5) Includes social security contributions as well as contribution to occupational pension plans (2013 restated to include contributions on restated LTI amount cost allowances)

Explanatory comments to the compensation table: –– The target compensation of the members of Group Management (fixed base salary, target bonus and grant value of long-term incentive) has not been increased from 2013 to 2014, except for the two members who joined the Group Management in 2014. The overall higher compensation of Group Management is explained by the fact that the compensation of the former CFO during the notice period is included, therefore the table includes ten members in 2014, versus nine members in 2013. –– The performance achievement under the performance bonus is higher in 2014 than in 2013. Further details are provided below. –– The grant value of the Long-Term Incentive includes the value of the grant made to the former CFO. However, this grant is forfeit- ed due to the termination of employment. In addition, the grant value of the long-term incentive includes, for one new member of Group Management, the pro rata participation in the unvested plans (LTI 2012–2014 and LTI 2013–2015). –– Restatement of 2013 figures: • Long-Term Incentive: the restated 2013 figure reflects 100% of the value of the grant awarded in 2013, in line with the structure of the binding shareholders, vote on compensation, instead of the accounting value (grant value spread over the vesting period). • Other payments: the restated 2013 figure includes the cost allowances for the international assignees, such as tax equalization payments, housing, schooling and home leave. Those items are not considered as compensation because the employee does not benefit from any financial advantage (those items simply cover cost associated to the international assignment), however it has been decided to include those costs into the compensation table in order to be fully compliant with the Ordinance. • Social security contributions: the restated 2013 figure includes the social security contributions made on the cost allowances mentioned above and the expected social security contributions on the restated long-term incentive amount.

In the year under review, no compensation was paid to former members of Group Management. No compensation was paid to parties closely related to members of Group Management.

No member of the Group Management was granted a loan during the reporting year. No loans were outstanding at the end of the year under review.

Sika Annual Report 2014 Compensation Report 73 Performance in 2014 (not audited) The financial year 2014 has been an outstanding year for Sika, with an 8.3% revenue growth (in local currencies 13%) and 21% profitability increase (earnings before interest and tax).

In the performance bonus, Sika has outperformed the peer companies both in terms of net sales growth (ranked 2nd) and in terms of EBIT improvement year on year (ranked 6th). The group performance achievement is estimated at 168% (best-estimate at time of publication) and will be calculated by Obermatt based on the annual report publications of the peer companies before the pay-out date in April 2015.

Individual performance, which is mainly measured by EBIT and net working capital improvement versus previous year, at Group and regional level, ranges from 110% to 188% for members of Group Management and amounts to 170% for the CEO. Consequently, the overall pay-out percentage ranges from 145% to 176% for Group Management and amounts to 169% for the CEO. As per the plan rules, the performance bonus payout has been capped at 150% for the CEO and the members of Group Management with a higher pay-out percentage.

In the Long-Term Incentive that vested in 2014 (LTI 2012–2014), the ROCE performance condition of 20% in the last year of the vesting period (old plan rule) has been overachieved: in 2014, ROCE, excluding acquisitions, amounts to 27.3%, leading to a pay-out of 100% (cap). Therefore, the 1,382 units granted to the current members of Group Management (as of December 31, 2014) have vested with a vesting value of CHF 4.1 million. The value at vesting is higher than the value at grant due to the positive development in the share price during the vesting period (2012–2014).

In the Long-Term Incentive that has been granted in 2014 (LTI 2014–2016), 329 performance share units have been granted to the CEO and 733 to the other current members of Group Management (as of December 31, 2014). Those PSU have an overall grant value of CHF 3.1 million and will vest on December 31, 2016 based on ROCE performance and upon the continuous employment of the participant.

Overview of the unvested PSU grants (includes members of Group Management as of December 31, 2014)

Plan Grant date Performance Vesting date Unblocking Number of Total value at Vesting level Number of Total value at (PSU)* period (PSU) date of PSU granted grant (CHF) in % of grant shares vesting (CHF) shares (vesting)

LTI 2012 01.01.2012 2012–2014 31.12.2014 April 2019 1,382 2,373,099 100% 1,382 4,057,552 To be To be To be LTI 2013 01.01.2013 2013–2015 31.12.2015 April 2020 1,434 3,038,924 determined determined determined To be To be To be LTI 2014 01.01.2014 2014–2016 31.12.2016 April 2021 1,062 3,105,743 determined determined determined

* For new members of Group Management, grant date may be different (January 1 of the year following their nomination, pro rata participation in the grants that are still in the vesting period)

Shareholdings of the members of the Board of Directors and Group Management in 2014

At the end of 2014, members of the Board of Directors held a total of 3,928 registered shares of Sika AG (2013: 3,043). At the end of 2014, members of the Group Management held a total of 6,305 registered shares of Sika AG (2013: 9,438). This figure includes both privately acquired shares and those allocated under the Group’s compensation schemes. At the end of 2014, members of the Board of Directors and of Group Management do not hold any options.

The detail on shareholdings of the members of the Board of Directors and of Group Management is included in note 20 of the consolidated financial statements on page 141 of the annual report.

Equity overhang and dilution as of December 31, 2014 In total as of December 31, 2014, the equity overhang, defined as the total number of share units and restricted shares outstanding divided by the total number of outstanding shares (2,151,199 bearer shares and 2,333,874 registered shares) amounts to 14,630 units, representing 0.003%. The company’s “burn rate,” defined as the number of equities (restricted share and share units) granted in 2014 (4,400 units) divided by the total number of common shares outstanding is 0.001%.

Sika Annual Report 2014 Compensation Report 74 Changes foreseen for 2015

A thorough review of the compensation policy and programs was conducted in summer 2014. Based on this review, the Board of Directors concluded that the compensation system is well aligned to the business strategy of the company, to the long-term interests of the shareholders, while being compliant to the different regulations and to best-practice corporate governance principles. Therefore, it was decided to not undertake any fundamental change, but rather to strengthen the existing principles: –– For the LTI 2015–2017, the ROCE target will be increased from 20% to 24%. The threshold has been increased from 18% to 20%. –– Effective2015, an LTI plan has been introduced for members of Sika Senior Management (by definition, Sika SeniorM anagement includes the management level reporting into Group Management, approx. 150 participants). The objective of introducing this new incentive plan is to cascade the principles of compensation applicable to Group Management to the broader group of senior managers, in order to promote the long-term success of the company and to align the interests of the Sika Senior Managers with those of the shareholders. The new LTI plan is structured similarly to the plan applying to Group Management. It is a Performance Share Unit plan with a three-year vesting period based on the same ROCE performance condition. The Performance Share Unit award is settled in cash at the end of the vesting period.

Those changes reinforce the compensation principles of rewarding management for company performance, long-term success and sustainable value creation for the shareholders.

Sika Annual Report 2014 Compensation Report 75 Report of the statutory auditor To the General Meeting of Sika Ltd, Baar

Report of the statutory auditor on the remuneration report We have audited pages 72 to 73 of the remuneration report of Sika Ltd for the year ended December 31, 2014.

Responsibility of the Board of Directors. The Board of Directors is responsible for the preparation and overall fair presentation of the remunera-tion report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the remuneration system and defining individual remuneration packages.

Auditor’s responsibility. Our responsibility is to express an opinion on the remuneration report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the remu-neration report complies with Swiss law and articles 14–16 of the Ordinance.

An audit involves performing procedures to obtain audit evidence on the disclosures made in the remu-neration report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the remuneration report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion. In our opinion, the remuneration report for the year ended December 31, 2014 of Sika Ltd complies with Swiss law and articles 14–16 of the Ordinance.

Zug, February 25, 2015

Ernst & Young Ltd

Bernadette Koch Danielle Matter Licensed audit expert licensed audit expert (Auditor in charge)

Sika Annual Report 2014 Compensation Report 76 Sika Annual Report 2014 Compensation Report 77 Financial Report

3.1 Financial Statements 4

3.2 appendix to the consolidated financial statements 6

3.3 5-Year Reviews 12

3.4 SIKa AG Financial Statements Sika Annual Report 2014 15 Compensation Report 78 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET in CHF mn Notes 12/31/2013 12/31/2014

Cash and cash equivalents 1 1,028.3 898.8 Accounts receivable 2 912.7 1,006.0 Inventories 3 539.0 591.3 Prepaid expenses and accrued income 92.0 92.3 Other current assets 4 18.9 7.7 Current assets 2,590.9 2,596.1 Property, plant, and equipment 5 920.2 958.3 Intangible assets 6 1,066.9 1,074.6 Investments in associated companies 7 13.9 14.3 Deferred tax assets 8 104.7 130.6 Other non-current assets 4 39.3 44.0 Non-current assets 2,145.0 2,221.8

ASSETS 4,735.9 4,817.9

Accounts payable 9 557.9 605.4 Accrued expenses and deferred income 10 204.6 214.3 Bond 12 299.7 0.0 Income tax liabilities 73.3 77.4 Current provisions 13 22.0 19.2 Other current liabilities 11 34.7 34.8 Current liabilities 1,192.2 951.1 Bonds 12 946.9 947.6 Non-current provisions 13 93.0 96.9 Deferred tax liabilities 8 130.4 118.5 Employee benefit obligation 14 212.9 303.8 Other non-current liabilities 11 24.3 16.7 Non-current liabilities 1,407.5 1,483.5 LIABILITIES 2,599.7 2,434.6

Capital stock 1.5 1.5 Treasury shares -13.7 -10.8 Reserves 2,132.3 2,376.4 Equity attributable to Sika shareholders 2,120.1 2,367.1 Non-controlling interests 16.1 16.2 SHAREHOLDERS’ EQUITY 15 2,136.2 2,383.3

LIABILITIES AND SHAREHOLDERS’ EQUITY 4,735.9 4,817.9

SIKA ANNUAL REPORT 2014 Consolidated financial statements 79 CONSOLIDATED INCOME STATEMENT FROM JANUARY 1 TO DECEMBER 31

% 2013 % 2014 Change in CHF mn Notes in %

Net sales 16 100.0 5,142.2 100.0 5,571.3 8.3 Material expenses 17 -47.6 -2,446.6 -47.0 -2,620.0 Gross result 52.4 2,695.6 53.0 2,951.3 9.5 Personnel expenses 18 -20.1 -1,031.1 -19.7 -1,093.7 Other operating expenses 18 -19.2 -988.6 -19.0 -1,059.3 Operating profit before depreciation 18 13.1 675.9 14.3 798.3 18.1 Depreciation and amortization expenses 19 -2.9 -152.4 -2.9 -165.1 Operating profit 10.2 523.5 11.4 633.2 21.0 Interest income 21 0.1 3.0 0.0 2.7 Interest expenses 20 -0.7 -33.9 -0.5 -30.5 Other financial income 21 0.1 5.8 0.1 5.6 Other financial expenses 20 -0.4 -22.8 -0.4 -21.6 Income from associated companies 21 0.0 1.1 0.0 1.2 Profit before taxes 9.3 476.7 10.6 590.6 23.9 Income taxes 8 -2.6 -132.0 -2.7 -149.4

Net profit 6.7 344.7 7.9 441.2 28.0 Profit attributable to Sika shareholders 6.7 342.2 7.9 439.0 Profit attributable to non-controlling interests 22 0.0 2.5 0.0 2.2

Undiluted/diluted earnings per bearer share (in CHF) 23 135.27 173.19 28.0 Undiluted/diluted earnings per registered share (in CHF) 23 22.55 28.87 28.0

SIKA ANNUAL REPORT 2014 Consolidated financial statements 80 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

% 2013 % 2014 Change in CHF mn Notes in %

Net profit 6.7 344.7 7.9 441.2 28.0

Actuarial gains/(losses) on employee benefit obligation 14 1.2 64.2 -1.5 -85.9 Income tax effect -0.2 -11.3 0.3 17.9 Items that will not be reclassified to profit or loss 1.0 52.9 -1.2 -68.0

Exchange differences taken to equity -1.2 -61.6 0.2 11.3 Items that may be reclassified subsequently to profit or loss -1.2 -61.6 0.2 11.3

Other comprehensive income -0.2 -8.7 -1.0 -56.7

Comprehensive income 6.5 336.0 6.9 384.5 14.4 Attributable to Sika shareholders 6.5 334.0 6.8 381.0 Attributable to non-controlling interests 0.0 2.0 0.1 3.5

SIKA ANNUAL REPORT 2014 Consolidated financial statements 81 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Capital Capital Treasury Currency Retained Equity Non-con- Total stock surplus shares trans- earnings attributable trolling equity lation to Sika interests differ- share- in CHF mn ences holders

January 1, 2013 1.5 203.1 -27.6 -364.3 2,082.2 1,894.9 14.9 1,909.8 Profit of the year 342.2 342.2 2.5 344.7 Other comprehensive income -61.1 52.9 -8.2 -0.5 -8.7 Comprehensive income 0.0 0.0 0.0 -61.1 395.1 334.0 2.0 336.0 Transactions with treasury shares 1 13.9 -3.1 10.8 10.8 Share based payments 8.1 8.1 8.1 Dividends 2 -129.2 -129.2 -0.8 -130.0 Inflation adjustment 4 1.5 1.5 1.5 December 31, 2013 1.5 203.1 -13.7 -425.4 2,354.6 2,120.1 16.1 2,136.2

January 1, 2014 1.5 203.1 -13.7 -425.4 2,354.6 2,120.1 16.1 2,136.2 Profit of the year 439.0 439.0 2.2 441.2 Other comprehensive income 10.0 -68.0 -58.0 1.3 -56.7 Comprehensive income 0.0 0.0 0.0 10.0 371.0 381.0 3.5 384.5 Transactions with treasury shares 1 2.9 -5.2 -2.3 -2.3 Share based payments 12.1 12.1 12.1 Dividends 3 -144.6 -144.6 -0.9 -145.5 Purchase of non-controlling interests -1.8 -1.8 -2.5 -4.3 Revaluation 5 1.9 1.9 1.9 Inflation adjustment 4 0.7 0.7 0.7 December 31, 2014 1.5 203.1 -10.8 -415.4 2,588.7 2,367.1 16.2 2,383.3

1 Including income tax of CHF 0.1 million (CHF 0.3 million) in retained earnings. 2 Dividend per bearer share: CHF 57.00, dividend per registered share: CHF 9.50. 3 Dividend per bearer share: CHF 72.00, dividend per registered share: CHF 12.00. 4 Hyperinflation accounting has been applied since January 1, 2010, and concerns the subsidiary in Venezuela. 5 Revaluation call-/put-option Hebei Jiuqiang.

SIKA ANNUAL REPORT 2014 Consolidated financial statements 82 CONSOLIDATED STATEMENT OF CASH FLOWS in CHF mn Notes 2013 2014

Operating activities Profit before taxes 476.7 590.6 Depreciation/amortization 152.4 165.1 Increase (+)/decrease (-) in provisions/ employee benefit obligation and assets 7.6 -0.2 Increase (-)/decrease (+) in net working capital 60.0 -39.2 Other adjustments 26 6.1 3.3 Income taxes paid -128.8 -165.2 Cash flow from operating activities 574.0 554.4

Investing activities Property, plant, and equipment: capital expenditures -143.6 -145.5 Property, plant, and equipment: disposals 12.6 15.8 Intangible assets: capital expenditures -10.3 -7.2 Acquisitions less cash and cash equivalents -410.9 -68.8 Acquisitions (-)/disposals (+) of financial assets -2.8 1.1 Cash flow from investing activities -555.0 -204.6

Financing activities Increase in financial liabilities 5.7 3.3 Repayment of financial liabilities -11.8 -29.9 Repayment of a bond -250.0 -300.0 Issue of bonds 398.3 0.0 Purchase of treasury shares -22.1 -24.2 Sale of treasury shares 33.8 22.3 Dividend payment to shareholders of Sika AG -129.2 -144.6 Dividends related to non-controlling interests -0.8 -0.9 Purchase of non-controlling interests 0.0 -6.0 Cash flow from financing activities 23.9 -480.0

Exchange differences on cash and cash equivalents -8.8 0.7

Net change in cash and cash equivalents 34.1 -129.5 Cash and cash equivalents at the beginning of the year 994.2 1,028.3 Cash and cash equivalents at the end of the year 1,028.3 898.8

Cash flow from operating activities contains: Dividends from associated companies 1.9 0.6 Interest received 2.5 2.5 Interest paid -29.5 -29.6

SIKA ANNUAL REPORT 2014 Consolidated financial statements 83 APPENDIX TO THE CONSOLIDATED FINANCIAL STATEMENTS

PRINCIPLES OF CONSOLIDATION AND VALUATION

CORPORATE INFORMATION Sika is a specialty chemicals company active in the development and production of systems and products for bonding, sealing, damping, reinforcing, and protecting in the building sector and the motor vehicle industry.

ACCOUNTING POLICIES

BASIS OF PREPARATION The financial statements of the Sika Group are prepared in conformity with the provisions of the International Accounting Standards Board (IASB). All standards (IAS/IFRS) and interpretations (IFRIC/SIC) applicable as of December 31, 2014, were taken into account. The financial statements are prepared according to the going-concern principle. The Consolidated Financial Statements have been prepared under the historical cost principle with the exception of financial assets and liabilities (including derivative instruments) at fair value through profit and loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed on page 87 of the download pdf of this report.

CHANGES IN ACCOUNTING POLICY AND DISCLOSURES The accounting standards applied conform to those standards that were valid in the previous year. Exceptions are the following revised and new standards, which Sika applies since January 1, 2014. The application of these standards does not have any material impact on the Consolidated Financial Statements of the Group.

–– Amendments to IAS 32 – Offsetting financial assets and financial liabilities –– Amendments to IAS 36 – Recoverable amount disclosures for non-financial assets –– Amendments to IAS 39 – Novation of derivatives and continuation of hedge accounting –– Amendments to IFRS 10, IFRS 12 und IAS 27 – Investment entities –– IFRIC 21 – Levies

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 84 A number of new standards and amendments to standards and interpretations are effective for the financial year 2015 and later, and have not been applied in preparing these Consolidated Financial Statements. If they had been applied in 2014 they would have had no significant effect on the Consolidated Financial Statements of the Group:

–– Amendments to IAS 1 – Disclosure initiative (applicable as of January 1, 2016) –– Amendments to IAS 16 and IAS 38 – Clarification of acceptable methods of depreciation and amortisation (applicable as of January 1, 2016) –– Amendments to IAS 19 – Employee benefits entitled defined benefit plans: employee contributions (applicable as of January 1, 2015) –– Amendments to IAS 27 – Equity method in separate financial statements (applicable as of January 1, 2016) –– Amendments to IFRS 7, IFRS 9 and IAS 39 – Hedge accounting (applicable as of January 1, 2018) –– IFRS 9 – Financial instruments (applicable as of January 1, 2018) –– Amendments to IFRS 10 and IAS 28 – Sale or contribution of assets between an investor and its associate or joint venture (applicable as of January 1, 2016) –– Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment entities: applying the consolidation exception (applicable as of January 1, 2016) –– Amendments to IFRS 11 – Accounting for acquisitions of interests in joint operations (applicable as of January 1, 2016) –– IFRS 15 – Revenue from contracts with customers (applicable as of January 1, 2017) –– Annual improvements (December 2013) – Collective standard with amendments to various IFRS standards with the primary goal of eliminating inconsistencies and clarifying terminology (applicable as of January 1, 2015) –– Annual improvements (2012–2014 Cycle) (applicable as of January 1, 2016)

New standards and interpretations are usually applied at the applicable date. However, the options for early adoption are considered individually by Sika.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 85 CONSOLIDATION METHOD

BASIS The Consolidated Financial Statements are based on the balance sheets and income statements of Sika AG, Baar, Switzerland, and its subsidiaries as of December 31, 2014, prepared in accordance with uniform standards.

SUBSIDIARIES Companies which are controlled by Sika are fully consolidated. The consolidation includes 100% of their assets and liabilities as well as expenses and income; non-controlling interests in shareholders’ equity and net income for the year are excluded and shown separately as part of non-controlling interests.

ASSOCIATED COMPANIES The equity method is applied to account for investments ranging from 20% to 50%, provided that Sika exercises significant influence. The investments are included in the balance sheet under “Investments in associated companies” in terms of the Group’s percentage share in net assets including goodwill; in the income statement the Group’s share in the net income for the year is disclosed in “Income from associated companies”.

OTHER NON-CONTROLLING INTERESTS Other non-controlling interests are carried at fair value.

INTRA-GROUP TRANSACTIONS Transactions within the Group are eliminated as follows: –– Intra-Group receivables and liabilities are eliminated in full. –– Intra-Group income and expenses and the unrealized profit margin from intragroup transactions are eliminated in full.

BUSINESS COMBINATIONS AND GOODWILL Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquired company. For each business combination, the acquirer measures the non-controlling interests in the acquired company either at fair value or at the proportionate share of the acquired company’s identifiable net assets. Acquisition related costs are expensed as incurred.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognized in the income statement. A contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit and loss.

Goodwill is subject to an annual impairment test. Impairments are recognized in the income statement. The impairment is not reversed at a later date.

When subsidiaries are sold, the difference between the selling price and the net assets including goodwill plus cumulative translation differences is recognized in the Consolidated Financial Statements as an operating result. The results of subsidiaries acquired or disposed of during the year are included in the Consolidated Income Statement from the effective date of acquisition of control or up to the effective date of loss of control.

SEGMENT REPORTING Sika carries out its worldwide activities according to regions. Heads of regions are members of Group Management. Group Management is the highest operative executive body measuring the profit and loss of segments and allocating resources.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 86 SIGNIFICANT ACCOUNTING ESTIMATES The key assumptions concerning the future as well as details of other key sources of estimation uncertainty on the balance sheet date that entail a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

IMPAIRMENT OF GOODWILL The Group tests at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The recoverable amounts of cash-generating units or groups of cash-generating units are determined based on value-in-use calculations. These calculations require the use of estimates such as expected future cash flows and discount rates. The carrying value of goodwill as of December 31, 2014, was CHF 663.8 million (CHF 627.1 million). Further details are presented in note 6.

FAIR VALUE OF ACQUISITION In connection with acquisitions, all assets, liabilities, and contingent liabilities are valued at fair value. Newly identified assets and liabilities are also included in the increase balance sheet. Fair value is determined in part based on assumptions regarding factors that are subject to a degree of uncertainty, such as interest rates and sales.

TRADEMARKS Trademarks with indefinite useful lives are tested annually for impairment in which the discounted future relief from royalties is calculated and compared with the book value. Future cash inflows must be estimated. Actual cash inflows can thereby deviate significantly from estimations. Discounting is in addition based on assumptions and estimations concerning business-specific capital costs, which are themselves dependent on country risks, credit risks, and additional risks resulting from the volatility of the respective business.

CUSTOMER RELATIONS Customer relations are amortized over their estimated useful life. The estimated useful life is based on estimates of the time period during which this intangible asset generates cash flows, as well as historic empirical data concerning customer loyalty. Calculation of the present value of estimated future cash flows includes significant assumptions, especially of future sales. Discounting is in addition also based on assumptions and estimations concerning business-specific capital costs, which are themselves dependent on country risks, credit risks, and additional risks resulting from the volatility of the respective business.

DEFERRED TAX ASSETS Deferred tax assets resulting from unrealized tax loss carry forwards or timing differences are recognized to the extent that a realization of the corresponding tax advantage is probable. The assessment of the probability of the realization of a tax advantage requires assumptions based on the history of the respective company and on target figures for the future.

EMPLOYEE BENEFIT PLANS The Group maintains various employee benefit plans. Several statistical and other variables are used in the calculation of expenses and liabilities to estimate future developments. These variables include estimations and assumptions concerning the discount rate established by the management within certain guidelines. In addition, actuaries employ statistical information for actuarial calculation of benefit liabilities such as withdrawal or death probabilities, which can deviate significantly from actual results due to changes in market conditions, the economic situation as well as fluctuating rates of withdrawal and shorter or longer live expectancy of benefit plan participants.

PROVISIONS The calculation of provisions requires assumptions about the probability, size, and timely occurrence of a cash outflow. As far as an outflow of resources is probable and a reliable estimation is possible, a provision is recognized.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 87 VALUATION PRINCIPLES

CONVERSION OF FOREIGN CURRENCIES Foreign currency transactions are translated into the functional (local) currency at the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities in a foreign currency are translated into the functional currency on every balance sheet date by applying exchange rates valid on the balance sheet date. The resulting exchange rate differences are recognized in the income statement.

The financial statements of subsidiaries outside Switzerland are converted into Swiss francs as follows: –– Balance sheet at year-end rates –– Income statements at annual average rates

The effects from the translation of the functional currency into Swiss francs are recognized in other comprehensive income.

The rates listed below were applied.

Currency Quantity 2013 2013 2014 2014 Balance sheet 1 Income Balance sheet 1 Income CHF statement 2 CHF statement 2 Country CHF CHF

Egypt EGP 100 12.80 13.49 13.84 12.87 Australia AUD 1 0.80 0.90 0.81 0.83 Brazil BRL 100 37.68 43.13 37.33 39.03 Chile CLP 10,000 16.94 18.80 16.31 16.04 China CNY 100 14.70 15.11 15.96 14.86 Euro zone EUR 1 1.23 1.23 1.20 1.21 Great Britain GBP 1 1.47 1.45 1.54 1.51 India INR 100 1.44 1.59 1.57 1.50 Japan JPY 100 0.85 0.95 0.83 0.87 Canada CAD 1 0.84 0.90 0.86 0.83 Colombia COP 10,000 4.61 4.97 4.16 4.60 Mexico MXN 100 6.79 7.28 6.73 6.89 Poland PLZ 100 29.55 29.32 28.14 29.06 Russia RUB 1,000 27.10 29.10 16.60 24.20 Sweden SEK 100 13.86 14.26 12.80 13.37 Turkey TRY 100 41.47 48.84 42.46 41.80 USA USD 1 0.89 0.93 0.99 0.91

1 Y ear-end rates. 2 Annual average rates.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 88 CONSOLIDATED BALANCE SHEET

CASH AND CASH EQUIVALENTS This position includes cash and cash equivalents.

RECEIVABLES Accounts receivable are recorded following deduction of an allowance for doubtful debts necessary for business purposes. A specific provision for impairment is carried out on accounts receivable for which payment is considered at risk.

INVENTORIES Raw materials and merchandise are stated at acquisition cost; finished and semi-finished products are stated at production cost, however at the highest at their net realizable sales value. Acquisition or production costs are determined using a standard cost approach.

PREPAID EXPENSES AND ACCRUED INCOME This item includes accrued income unrelated to accounts receivable.

PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment are carried at acquisition cost, less accumulated depreciation required for business purposes. The capitalization is made based on components. Value-enhancing expenses are capitalized and depreciated over their useful lives. Repair, maintenance, and replacement costs are charged directly to the income statement. Depreciation under the straight-line method is based on the anticipated useful life of the asset, including its operational usefulness and age-related technical viability. The acquisition costs include borrowing costs for long-term construction projects if the recognition criteria are met.

DEPRECIATION SCHEDULE Buildings 25 years Infrastructure 15 years Plants and machinery 5 – 15 years Furnishings 6 years Vehicles 4 years Laboratory equipment and tools 4 years IT hardware 4 years

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 89 INTANGIBLE ASSETS Internally generated patents, trademarks, and other rights are not capitalized. Research and development expenditures for new products are recognized in the income statement, since these do not fulfill the recognition criteria. Acquired intangible assets are usually capitalized and amortized using the straight-line method.

Development costs for software are capitalized as intangible assets, provided that the software will generate a future economic benefit through sale or through use within the Group and that its cost can be reliably measured. Conditions for capitalization are the technical feasibility of the asset and the intention and ability to complete its development, as well as the availability of adequate resources. Sika has created a SAP platform with standard processes that a number of companies have been using since 2010. The rollout will take several years. The capitalized costs are transferred to the companies in the year of first use.

AMORTIZATION SCHEDULE Software 2 – 10 years 1 Patents 5 – 10 years Customer relations 2 – 20 years Trademarks 3 – 10 years

1 With the exception of the SAP platform, which has a useful life of ten years, software is usually written off over two to five years.

Acquired trademarks are amortized insofar as a useful life can be determined. Otherwise trademarks are not amortized but are tested for impairment annually.

IMPAIRMENT OF NON-FINANCIAL ASSETS The recoverability of property, plant, and equipment as well as intangible assets is reviewed if events or changed circumstances indicate that the carrying amount may not be recoverable. Intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. If the carrying amount exceeds the recoverable amount, a special depreciation allowance is recorded on the higher of fair value less cost to sell and the value in use of an asset which corresponds to the discounted, anticipated future cash flows. For the purpose of impairment tests, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

LEASING Fixed assets acquired under finance leasing contracts and therefore owned by the Group in respect to risks and rewards of ownership, are classified under finance leasing. Such assets are carried at fair value of the lease property or, if lower, present value of the minimum lease payments and are reported as non-current assets and financial liabilities. Assets classified as finance leasing are depreciated over their estimated useful life or depreciated over a shorter leasing contract. Unrealized earnings from sale and leaseback transactions that fall under the definition of finance leasing are shown as a liability and are realized over the lease term. Payments for operating leases are recorded as operating expense and accordingly charged to the income statement.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 90 DEFERRED TAXES (ASSETS/LIABILITIES) Deferred taxes are considered using the liability method. According to this method the effects on income taxes resulting from temporary differences between Group-internal and taxable balance sheet values are recorded as deferred tax assets or deferred tax liabilities, respectively. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is recognized or the liability is settled based on the rates (and tax laws) that have been substantively enacted. Changes in deferred taxes are reflected in the income tax expense, the statement of comprehensive income, or directly in equity. Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries and associates, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets including those that can be applied to tax loss carry forwards are recognized to the extent that their realization is probable. Deferred tax liabilities are recognized for all taxable temporary differences insofar as the accounting regulations foresee no exception.

LIABILITIES Current liabilities consist of liabilities with maturities of less than twelve months. Tax liabilities include taxes due and accrued. Non-current liabilities include loans and provisions with a term of more than one year.

PROVISIONS Provisions required for liabilities from guarantees, warranties, and environmental risks as well as restructuring are recognized as liabilities. Provisions are only recognized if Sika has a third-party liability that is based on a past event and can be reliably assessed. Potential losses due to future incidents are not recognized in the balance sheet.

EMPLOYEE BENEFIT PLANS The Group maintains various employee benefit plans that differ in accordance with local practices. Group contributions to defined contribution plans are recognized in the income statement. Defined benefit plans are administered either through self-governed pension funds (funded) or recognized directly in the balance sheet (unfunded). The amount of the liabilities resulting from defined benefit plans is regularly determined by independent experts under application of the projected unit credit method. Actuarial gains and losses are recognized directly in other comprehensive income and are not reclassified subsequently to profit and loss. Asset surpluses of employee pension funds are considered under application of IFRIC 14 only to the extent of possible future reimbursement or reduction of contributions.

CAPITAL STOCK The capital stock is equal to the par value of all issued bearer and registered shares.

CAPITAL SURPLUS This entry consists of the value of paid-in capital in excess of par value (less transaction costs).

TREASURY SHARES Treasury shares are valued at acquisition cost and deducted from shareholders’ equity. Differences between purchase price and sales proceeds of treasury shares are shown as a change in retained earnings.

CURRENCY TRANSLATION DIFFERENCES This item consists of the differential amount that arises from the translation into Swiss francs of assets, liabilities, income, and expenses of Group companies that do not use Swiss francs as functional currency.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 91 HYPERINFLATION In countries experiencing hyperinflation, prior to conversion into the presentation currency the annual financial statements are adjusted for local inflation in order to eliminate changes in purchasing power. Adjustment for inflation is based on the relevant price indices at the end of the period under review.

RETAINED EARNINGS Retained earnings mainly comprise accumulated retained earnings of the Group companies that are not distributed to shareholders as well as profit/loss of treasury shares. Profit distribution is subject to local legal restrictions.

FINANCIAL ASSETS AND LIABILITIES Financial assets and financial liabilities are classified in the following categories: –– Financial assets and financial liabilities held for trading as well as designated by the Group and derivatives, “at fair value through profit and loss”: these are initially recognized at fair value. Gains and losses arising from changes in the fair value are presented in the financial result. The designation as at fair value through profit and loss is consistent with the entity’s risk management and investment strategy. –– Loans and receivables: this category includes loans granted and credit balances. The valuation occurs at nominal value insofar as repayment within one year is foreseen. Otherwise they are classified as assets carried at amortized cost using the effective interest method. –– All other financial assets are classified as available-for-sale. The assets are carried at fair value and gains and losses arising from changes in the fair value are presented in other comprehensive income. Upon sale, permanent depreciation in value or other divestiture, the cumulative gains and losses that had been recognized in other comprehensive income are reclassified from equity to the income statement. –– Non-current financial liabilities are carried at amortized cost. Once they have been settled, financial liabilities are derecognized.

All purchases and sales of financial assets and liabilities are recognized on the settlement date. Financial assets are derecognized when Sika loses the rights to receive cash flows for the investment. Normally this occurs through the sale of assets or the repayment of granted loans or accounts receivable. The financial liabilities include financing debts that are carried at amortized cost using the effective interest method.

On each balance sheet date the Group assesses whether a financial asset is impaired. If objective evidence exists that an impairment of financial assets carried at amortized cost has incurred, then the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If in the case of accounts receivable there is objective evidence that not all due amounts will be rendered according to originally agreed invoicing conditions (as for example in high probability of insolvency or significant financial difficulties of a debtor), an impairment is recognized through use of an allowance account. The derecognition of receivables occurs when they are assessed as uncollectible. If an available-for-sale asset is impaired in its value, the cumulative loss – measured as the difference between the acquisition cost and the current fair value – is removed from equity and recognized in the income statement.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 92 INCOME STATEMENT

NET SALES Proceeds from the sale of goods and services are only reported in the income statement if risks and rewards of ownership have been substantially transferred to the purchaser, revenue can be reliably measured and when it is probable that future economic benefits will flow to the entity. Net sales include all revenues from the sale of goods and services less discounts granted.

CONSTRUCTION CONTRACTS Contract revenue and contract costs are recognized in accordance with the stage of completion. An expected loss is recognized as an expense immediately.

PERSONNEL EXPENSES Personnel expenses include all payments to persons standing in an employment relationship with Sika. This item also encompasses such expenditures as pension fund contributions, health insurance contributions, and taxes and levies directly associated with personnel compensation.

EMPLOYEE PARTICIPATION PLAN – SHARE-BASED PAYMENTS The Group operates a number of share-based compensation plans. The total amount to be recognized in profit and loss is determined by reference to the grant date fair value of the equity instrument. The expenses are recognized in personnel expenses over the vesting period.

RESEARCH AND DEVELOPMENT Research expenses are recognized in the income statement. Development expenses are not capitalized if the recognition criteria have not been met.

DEPRECIATION Property, plant, and equipment are depreciated using the straight-line method based on the expected useful life of the asset.

INTEREST EXPENSE/OTHER FINANCIAL EXPENSES In general, all interests and other expenses paid for the procurement of loans are recognized in the income statement. Any borrowing cost accruing in the course of development projects, e. g. the construction of new production facilities or software development, are capitalized together with the assets created.

INTEREST INCOME/OTHER FINANCIAL INCOME Interest income is recognized pro rata temporis using the effective interest method. Dividend income is recognized when the right to receive payment is established.

INCOME TAXES Income tax expenses include income taxes based on current taxable income and deferred taxes.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 93 SCOPE OF CONSOLIDATION AND ACQUISITIONS

The Consolidated Financial Statements of the Sika Group encompass the financial statements of Sika AG, Zugerstrasse 50, 6340 Baar, Switzerland, as well as its subsidiaries (see list starting on page 125 of the download pdf of this report) and associated companies (see note 7). In the year under review the scope of consolidation was expanded to include the newly acquired companies (see the next pages) and the following companies:

–– Sika International Chemicals LLC, Abu Dhabi, UAE –– Sika Manufacturing Nigeria Limited, Lagos, Nigeria –– Sika Côte d’Ivoire SARL, Abidjan, Ivory Coast –– Sika Moçambique Limitada, Maputo Cidade, Mozambique –– Sika Lanka (Private) Limited, Colombo, Sri Lanka –– Sika Latin America Mgt. Inc, Ciudad de Panama, Panama –– Sika Europe Management AG, Zurich, Switzerland –– Sika BH d.o.o. Sarajevo, Bosnia-Herzegovina –– Sika Albania SHPK, Tirana, Albania

The scope of consolidation was reduced to exclude the following companies:

–– Axim SAS, Guerville, France, was merged with Sika France SAS, Paris, France. –– Dyflex HD Co. Ltd., Tokyo, Japan, was merged with Dyflex Co. Ltd., Tokyo, Japan. –– Sucoflex AG, Pfäffikon, Switzerland, was merged with Sika Schweiz AG, Zurich, Switzerland. –– Consorzio IGS, Zurich, Switzerland, was liquidated. –– BV Descol Kunststof Chemie, Deventer, Netherlands, was merged with Sika Netherland B.V., Utrecht, Netherlands. –– Sika Viscocrete Belgium NV, Brussels, Belgium, was merged with Sika Belgium nv, Brussels, Belgium. –– Casco Schönox Denmark A/S, Ballerup, Denmark, was merged with Sika Denmark A/S, Fredensborg, Denmark. –– Casco Schönox Norway A/S, Sofiemyr, Norway, was merged with Sika Norge A/S, Skytta, Norway. –– Casco Schönox Holding BV, Molenbeke, Netherlands, was liquidated.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 94 ACQUISITIONS 2013

In 2013 Sika acquired various companies or parts of companies, including Everbuild and AkzoNobel’s Building Adhesives business. The purchase prices and their allocation (PPA) only changed insignificantely for the Building Adhesives business. This resulted in adjustments in the consolidated balance sheet as of December 31, 2013. The other purchase price allocations did not change and are now definite.

ACQUIRED NET ASSETS AT FAIR VALUE Other Everbuild Building Adhesives in CHF mn acquisitions 1

Cash and cash equivalents 1.4 2.6 2.0 Accounts receivable 3.5 19.5 29.6 Inventories 4.8 8.5 23.3 Other current assets 1.7 0.5 2.8 Property, plant, and equipment 10.7 16.4 34.2 Intangible assets 5.0 13.4 136.8 Other non-current assets 0.4 0.0 0.0 Total assets 27.5 60.9 228.7 Short-term loans and bank overdrafts 0.7 1.6 0.0 Accounts payable 2.2 10.8 16.2 Other current liabilities 1.0 6.2 10.5 Long-term loans and financial liabilities 0.0 0.3 0.2 Provisions 0.9 1.0 7.4 Employee benefit liabilities 0.4 0.0 8.4 Deferred tax liabilities 0.7 3.7 40.3 Total liabilities 5.9 23.6 83.0

Acquired net assets 21.6 37.3 145.7 Goodwill 10.8 46.7 161.5 Total purchase consideration 32.4 84.0 307.2 Cash in acquired assets -1.4 -2.6 -2.0 Payments still due (per December 31, 2013) -4.2 0.0 -2.5

Net cash outflow 26.8 81.4 302.7

1 Inatec, JM Texsa, Texsa India, Radmix/ASF, individually not material.

Since the purchase, Everbuild has contributed sales of CHF 55.1 million and net profit of CHF 3.2 million. If the acquisition had taken place on the first day of the business year, its additional contribution to consolidated net sales would have been CHF 46.2 million. Consolidated net profit would have been CHF 3.5 million higher.

Since the purchase, the Building Adhesives business has contributed sales of CHF 64.0 million and net loss of CHF 2.6 million. If the acquisition had taken place on the first day of the business year, its additional contribution to consolidated net sales would have been CHF 163.8 million. Consolidated net profit would have been CHF 13.0 million higher.

The other acquisitions have contributed sales of CHF 20.9 million and net profit of CHF 1.6 million since the purchase. If the other acquisitions had taken place on the first day of the business year, its additional contribution to consolidated net sales would have been CHF 16.6 million. Consolidated net profit would have been CHF 1.0 million higher.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 95 ACQUISITIONS 2014

In 2014, Sika acquired various companies or parts of companies.

Company Type of Transaction Stake in % Closing Date

LCS Optiroc Pte Ltd, Singapore and LCS Optiroc SDN. BHD, Malaysia Share deal 100.0 01/16/2014 Lwart Quimica Ltda., Brazil Share deal 100.0 05/02/2014 Business in Gunsan, South Korea Asset deal 04/14/2014 Klebag AG, Switzerland Share deal 100.0 05/26/2014

In December 2013, Sika agreed to acquire LCS Optiroc Pte Ltd. in Singapore and LCS Optiroc SDN. BHD in Malaysia, a leading manufacturer of cementitious powder products in Singapore. LCS Optiroc has a strong product offering which includes grouts, mortars, floor screeds, tile adhesives, and renders for interior and exterior finishing in the Refurbishment and Flooring target markets. The transaction was completed on January 16, 2014.

In February, Sika has agreed to acquire Lwart Quimica Ltda., a renowned supplier of waterproofing products in Brazil. The transaction was completed on May 2, 2014. The acquisition strengthens Sika’s position in the Brazilian construction chemicals market and complements Sika’s geographical footprint in Brazil.

In April, Sika acquired a company located in Gunsan, South Korea. The company manufactures and distributes flooring and coating products based on epoxy resins, acrylic emulsions, and polyurethane. The additional production capacity will enable Sika to strengthen its range of locally produced flooring and coating products and expand the production of its complete range of products.

In mid-May, Sika acquired Klebag AG, a manufacturer of adhesives for the sealing, bonding, and flooring markets. The takeover strengthens Sika’s position in the Swiss interior finishing sector.

Since the purchase, the acquisitions contributed sales of CHF 57.4 million and net profit of CHF 1.2 million. If the acquisitions had taken place on the first day of the business year, its additional contribution to consolidated net sales would have been CHF 20.0 million. Consolidated net profit would have been CHF 1.0 million higher.

Since the purchase prices and the purchase price allocations for all acquisitions still entail some uncertainty, all positions with the exception of “Cash and cash equivalents” are provisional. Production synergies and combined distribution channels and product portfolios justify the goodwill posted. Goodwill in the amount of CHF 1.6 million is tax deductible. Accounts receivable have a gross value of CHF 15.5 million and were adjusted since CHF 0.3 million were classified as non-recoverable.

The directly attributable transaction costs of all acquisitions amounted to CHF 0.8 million and were charged to other operating expenses.

As of January 7, 2014, Sika has acquired the remaining 24.5% of Dyflex HD Co. Ltd. The complete takeover further strengthens Sika ‘s position in the Japanese construction market. The acquisition of the remaining shares has no material impact on the Consolidated Financial Statements. Since the acquisition in 2010 a put-and-call agreement has been arranged. Sika could exercise its purchase price option as of the end of 2013. Sika therefore considered the outstanding company interests of 24.5% for which the purchase price had already been established, as acquired and consolidated the shareholding at 100% since acquisition. The payment is shown as a repayment of financial liabilities.

In the first half of the year 2014 Sika further increased its shareholdings from 70% to 100% in Jiangsu TMS Concrete Admixture Co. Ltd., Guangzhou.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 96 In the third quarter of 2014, Sika increased its shareholdings in Hebei Jiuqiang Building Material Co Ltd. by 18% to 85%. Since the acquisition of this company a put-and-call agreement for the remaining shares (33% respectively 15%) has been arranged. Sika has not acquired economic ownership over the outstanding company interests. Therefore, a share of net income is attributed to non-controlling interests. The non-controlling interests are recognized as financial liabilities at the end of each reporting period. The difference between the consideration paid and the amount by which the non-controlling interests are adjusted and the fair value adjustments of the financial liability are recognized directly in retained earnings.

For the acquisition of the non-controlling interests a purchase price of CHF 6.2 million has been agreed, whereof 0.2 million were directly settled with a receivable from the seller.

ACQUIRED NET ASSETS AT FAIR VALUES in CHF mn Acquisitions 2014 1

Cash and cash equivalents 3.7 Accounts receivable 15.2 Inventories 9.5 Other current assets 1.8 Property, plant, and equipment 18.9 Intangible assets 11.9 Total assets 61.0 Current bank loans 3.5 Accounts payable 5.8 Other current liabilities 1.1 Provisions 1.1 Employee benefit obligation 2.1 Deferred tax liabilities 4.3 Other non-current liabilities 0.1 Total liabilities 18.0

Acquired net assets 43.0 Goodwill 32.1 Total purchase price 75.1 Cash in acquired assets -3.7 Payments still due (per December 31, 2014) -2.6

Net cash outflow 68.8

1 LCS Optiroc, Lwart Quimica, business in Gunsan, Klebag; individually not material.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 97 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. CASH AND CASH EQUIVALENTS CHF 898.8 MN (CHF 1,028.3 MN) The cash management of the Group includes cash pooling, in which cash and cash equivalents available within the Group are pooled. The item “Cash and cash equivalents” includes cash and cash equivalents with a maturity of less than three months, bearing interest at a respectively valid rate. Cash and cash equivalents decreased mainly due to the repayment of the bond in the amount of CHF 300.0 million in June.

2. ACCOUNTS RECEIVABLE CHF 1,006.0 MN (CHF 912.7 MN) The following tables show accounts receivable, the development of the allowance for doubtful accounts as well as the portion of not overdue and overdue receivables including their age structure. Accounts receivable are non-interest-bearing and are generally due within 30 to 90 days.

ACCOUNTS RECEIVABLE in CHF mn 2013 2014

Receivables 981.6 1,080.3 Allowance for doubtful accounts -68.9 -74.3

Net accounts receivable 912.7 1,006.0

MOVEMENTS ON THE ALLOWANCE FOR DOUBTFUL ACCOUNTS in CHF mn 2013 2014

January 1 67.9 68.9 Allowance for acquired businesses 3.1 0.3 Additions to or increase in allowances 33.6 31.6 Reversal or utilization of allowances -33.4 -28.0 Exchange differences -2.3 1.5

December 31 68.9 74.3

AGE DISTRIBUTION OF ACCOUNTS RECEIVABLE in CHF mn 2013 2014

Net accounts receivable 912.7 1,006.0

Of which Not overdue 694.0 747.6 Past due < 31 days 150.8 179.8 Past due 31 – 60 days 42.2 46.2 Past due 61 – 180 days 37.6 45.3 Past due > 181 days 57.0 61.4 Allowance for doubtful accounts -68.9 -74.3

The increase and decrease of allowances for doubtful accounts are recognized in other operating expenses. Amounts entered as allowances are usually derecognized when payment is no longer expected.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 98 3. INVENTORIES CHF 591.3 MN (CHF 539.0 MN) Inventory write-offs amount to CHF 22.6 million (CHF 15.1 million) and are charged to material expenses. in CHF mn 2013 2014

Raw materials and supplies 164.8 180.8 Semi-finished goods 37.2 47.8 Finished goods 276.9 302.0 Merchandise 60.1 60.7

Total 539.0 591.3

4. OTHER ASSETS CHF 51.7 MN (CHF 58.2 MN) The assets contained in this category and any changes in them can be seen in the following table.

OTHER CURRENT ASSETS in CHF mn 2013 2014

Derivatives (at fair value through profit and loss) 10.9 1.2 Loans (loans and receivables) 3.1 3.0 Securities (at fair value through profit and loss) 4.9 2.8 Other financial assets 18.9 7.0 Other non-financial assets 0.0 0.7

Other current assets 18.9 7.7

OTHER NON-CURRENT ASSETS in CHF mn 2013 2014

Securities (at fair value through profit and loss) 21.5 28.8 Loans (loans and receivables) 3.7 1.3 Other financial assets 25.2 30.1 Employee benefit assets 1 14.1 13.9 Other non-financial assets 14.1 13.9

Other non-current assets 39.3 44.0

1 Refer to note 14, employee benefit obligation.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 99 5. PROPERTY, PLANT, AND EQUIPMENT CHF 958.3 MN (CHF 920.2 MN)

Property Plant Equipment Plants and Total buildings under in CHF mn construction

At January 1, 2013 Acquisition cost 106.8 617.4 1,326.9 55.9 2,107.0 Cumulative depreciation and impairment -0.8 -359.9 -872.9 -0.1 -1,233.7 Net values at January 1, 2013 106.0 257.5 454.0 55.8 873.3 Additions 3.0 8.5 68.1 64.0 143.6 Acquired on acquisition 10.2 21.6 28.9 0.6 61.3 Exchange differences -5.3 -8.8 -14.3 -4.7 -33.1 Disposals -5.4 -2.6 -5.8 0.0 -13.8 Reclassifications 1 1.8 7.8 36.5 -47.2 -1.1 Depreciation charge for the year 0.0 -21.2 -88.8 0.0 -110.0 At December 31, 2013 110.3 262.8 478.6 68.5 920.2

As January 1, 2014 Acquisition cost 111.2 631.6 1,379.5 68.7 2,191.0 Cumulative depreciation and impairment -0.9 -368.8 -900.9 -0.2 -1,270.8 Net values at January 1, 2014 110.3 262.8 478.6 68.5 920.2 Additions 3.7 17.0 63.5 61.3 145.5 Acquired on acquisition 3.1 9.2 6.6 0.0 18.9 Exchange differences -1.7 -0.2 5.3 0.0 3.4 Disposals -2.7 -8.9 -2.6 0.0 -14.2 Reclassifications 1 3.7 15.7 46.8 -66.2 0.0 Depreciation charge for the year -0.6 -21.0 -93.9 0.0 -115.5 At December 31, 2014 115.8 274.6 504.3 63.6 958.3 Acquisition cost 117.1 658.8 1,497.4 64.5 2,337.8 Cumulative depreciation and impairment -1.3 -384.2 -993.1 -0.9 -1,379.5 Net values at December 31, 2014 115.8 274.6 504.3 63.6 958.3

1 Plants and buildings under construction are reclassified after completion within property, plant, and equipment as well as intangible assets.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 100 In principle all plants are owned by subsidiaries. Some smaller plants as well as the adhesive plant, the R&D center and the logistics center of Sika Schweiz AG are financed by means of operating lease. Operating leases relate also to data processing equipment and copiers as well as vehicles used by the sales force. Leasehold contracts are insignificant. Plant and equipment includes machinery, vehicles, equipment, furnishings, and hardware.

Operating leases Finance leases 2013 2014 2013 2014 Minimum Minimum Minimum Interest Present Minimum Interest Present payments payments payments value payments value in CHF mn of payments of payments

Within 1 year 45.9 50.1 1.1 0.2 0.9 0.5 0.1 0.4 1 – 5 years 97.4 103.9 1.3 0.2 1.1 0.2 0.0 0.2 Over 5 years 49.5 34.0 0.4 0.1 0.3 0.3 0.1 0.2

Total 192.8 188.0 2.8 0.5 2.3 1.0 0.2 0.8

6. INTANGIBLE ASSETS CHF 1,074.6 MN (CHF 1,066.9 MN)

Goodwill Software Trademarks Customer Other Total in CHF mn relations intangibles

At January 1, 2013 Acquisition costs 426.9 147.9 93.3 221.5 63.6 953.2 Cumulative amortization and impairment -9.6 -88.3 -7.4 -70.6 -35.0 -210.9 Net values at January 1, 2013 417.3 59.6 85.9 150.9 28.6 742.3 Additions 0.0 9.1 0.0 0.0 1.2 10.3 Acquired on acquisition 219.0 0.5 21.4 103.7 29.6 374.2 Exchange differences -9.2 -0.5 -0.8 -6.4 -1.8 -18.7 Reclassifications (net) 0.0 0.3 0.0 0.0 0.8 1.1 Amortization for the year 0.0 -12.4 -3.9 -19.2 -6.8 -42.3 At December 31, 2013 627.1 56.6 102.6 229.0 51.6 1,066.9

At January 1, 2014 Acquisition costs 635.9 147.1 113.5 316.5 92.9 1,305.9 Cumulative amortization and impairment -8.8 -90.5 -10.9 -87.5 -41.3 -239.0 Net values at January 1, 2014 627.1 56.6 102.6 229.0 51.6 1,066.9 Additions 0.0 6.0 0.0 0.0 1.2 7.2 Acquired on acquisition 32.1 0.0 3.1 5.9 2.9 44.0 Exchange differences 4.6 0.0 0.2 0.8 0.5 6.1 Amortization for the year 0.0 -12.9 -5.3 -23.7 -7.7 -49.6 At December 31, 2014 663.8 49.7 100.6 212.0 48.5 1,074.6 Acquisition costs 672.6 152.5 116.9 326.6 98.1 1,366.7 Cumulative amortization and impairment -8.8 -102.8 -16.3 -114.6 -49.6 -292.1 Net values at December 31, 2014 663.8 49.7 100.6 212.0 48.5 1,074.6

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 101 The intangible assets (except goodwill and trademarks) have a finite useful life over which the assets are amortized. The developed SAP platform used since 2010 will be amortized on the basis of its effective use within the Group. The carrying amount was CHF 35.2 million (CHF 41.2 million) as of December 31, 2014. The remaining useful life is estimated to be six years (seven years).

Trademarks may have an indefinite useful life because they are influenced by internal and external factors such as strategic decisions, competitive and customer behavior, technical development, and altered market requirements. The carrying value of trademarks with an indefinite useful life amounts to CHF 72.4 million (CHF 72.4 million). The impairment test is based on estimated sales attributable to the trademark. The calculation of the value in use is based on the target figures and cash flow forecasts approved by the Board of Directors.The forecasting horizon is five years. Assumed thereby is a growth rate of 2.2% (1.9%) for the planning period. Afterwards a growth rate of 2.0% (2.0%) is assumed. The discount rate amounts to 11.5% (11.9%). The sensitivity analysis carried out shows that a realistic change in the key assumptions (5% of the royalty rate) would not result in the realizable amount falling below the carrying amount.

GOODWILL ITEMS TESTED FOR IMPAIRMENT. For all goodwill items an impairment test was carried out on the basis of the discounted cash flow method. The calculation of the value in use is based on the target figures and cash flow forecasts approved by the Board of Directors. The forecast horizon encompasses five years. The growth rates upon which the forecast is set correspond to the market expectations of the cash-generating units and range between 4.7% and 11.3% (3.5% and 11.4%) per year. The sensitivity analysis carried out shows that a realistic change in the key assumptions (-1% in growth rates or +0.5% of the discount rate) would not result in the realizable amount falling below the book value. The cash flow forecast beyond the planning period is extrapolated with a growth rate of 1.3% to 4.9% (1.5% to 3.0%), which in no case exceeds the long-term average growth rate in the corresponding market in which the cash-generating unit operates. The discount rates are determined on the basis of the weighted average cost of capital of the Group, with country- and currency-specific risks within the context of cash flows taken into consideration. The business segments within the regions constitute the cash-generating units.

GOODWILL ASSIGNED TO CASH-GENERATING UNITS in CHF mn Growth rates (%)1 Discount rates (%)2 Goodwill

December 31, 2013 Construction business EMEA 1.5 11.4 425.1 Construction business North America 1.5 13.3 82.6 Construction business Latin America 3.0 18.6 5.2 Construction business Asia/Pacific 3.0 11.3 58.0 Automotive 2.0 13.4 56.2

Total 627.1

December 31, 2014 Construction business EMEA 1.3 10.1 430.5 Construction business North America 2.0 12.4 91.3 Construction business Latin America 4.9 17.6 13.5 Construction business Asia/Pacific 3.1 11.3 73.3 Automotive 2.0 12.1 55.2

Total 663.8

1 Growth rate beyond the planning period. 2 Pre-tax discount rates (%).

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 102 7. INVESTMENTS IN ASSOCIATED COMPANIES CHF 14.3 MN (CHF 13.9 MN) The following associated companies are included in the Consolidated Financial Statements as of December 31, 2014: Condensil SARL, France (stake Sika 40%), Part GmbH, Germany (50%), Addiment Italia S.r.l., Italy (50%), Sarna Granol AG, Switzerland (50%), Hayashi-Sika Automotive Ltd., Japan (50%), Chemical Sangyo Ltd., Japan (50%), and Seven tech Co. Ltd., Japan (50%).

The following amounts represent the Group’s stake in net sales, and net income of associates.

ASSOCIATED COMPANIES (PARTICIPATIONS BETWEEN 20% AND 50%) in CHF mn 2013 2014

Sales 31.4 30.9 Profit 1.1 1.1

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 103 8. INCOME TAXES

TAX LOSS CARRY FORWARDS, FOR WHICH NO DEFERRED TAX ASSETS HAVE BEEN RECOGNIZED in CHF mn 2013 2014

1 year or less 0.0 0.0 1 – 5 years 8.8 10.3 Over 5 years or non-expiring 41.3 32.0

Total 50.1 42.3

RECONCILIATION OF DEFERRED TAX ASSETS AND LIABILITIES 2013 2014 in CHF mn Assets Liabilities Net Assets Liabilities Net

January 1 109.4 -96.2 13.2 104.7 -130.4 -25.7 Credited (+)/debited (-) to income statement 12.6 6.5 19.1 6.8 17.0 23.8 Credited (+)/debited (-) to other comprehensive income -10.9 -0.4 -11.3 17.9 0.0 17.9 Exchange differences -6.7 4.3 -2.4 1.2 -0.8 0.4 Acquisitions/divestments 0.3 -44.6 -44.3 0.0 -4.3 -4.3

December 31 104.7 -130.4 -25.7 130.6 -118.5 12.1

ORIGIN OF DEFERRED TAX ASSETS AND LIABILITIES 2013 2014 in CHF mn Assets Liabilities Net Assets Liabilities Net

Tax losses brought forward 9.8 9.8 10.6 10.6 Current assets 23.1 -11.7 11.4 25.9 -7.3 18.6 Property, plant, and equipment 9.4 -31.5 -22.1 9.0 -32.7 -23.7 Other non-current assets 2.2 -73.5 -71.3 2.4 -62.3 -59.9 Liabilities 60.2 -9.2 51.0 82.7 -10.2 72.5 Withholding taxes on dividends – -4.5 -4.5 – -6.0 -6.0

Total 104.7 -130.4 -25.7 130.6 -118.5 12.1

In the year under review deferred tax assets from tax loss carry forwards of CHF 4.4 million (CHF 4.3 million) were offset and deferred tax loss carry forwards of CHF 5.8 million (CHF 1.0 million) were generated.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 104 The tax rate decreased significantly to 25.3% (27.7%). Income taxes of CHF 149.4 million (CHF 132.0 million) consist of:

INCOME TAXES in CHF mn 2013 2014

Income tax during the year under review 150.1 170.0 Deferred income tax -19.1 -23.8 Income tax from prior years 1.0 3.2

Total 132.0 149.4

RECONCILIATION BETWEEN ANTICIPATED AND EFFECTIVE TAX EXPENSE in CHF mn % 2013 % 2014

Profit before taxes 476.7 590.6 Anticipated tax expense 25.9 123.6 23.9 141.3 Non-tax-deductible expenses 0.6 2.8 0.0 0.2 Change in anticipated tax rate -0.3 -1.2 -0.1 -0.6 Adjusted tax expense from earlier periods 0.2 1.0 0.6 3.2 Valuation adjustment on deferred tax assets 0.2 0.9 0.4 2.5 Withholding tax on dividends 1.2 5.6 1.2 7.0 Other -0.1 -0.7 -0.7 -4.2

Tax expense as per consolidated income statement 27.7 132.0 25.3 149.4

The anticipated average Group income tax rate of 23.9% (25.9%) corresponds with the average tax on profits of the individual Group companies in their respective fiscal jurisdictions. The change in the anticipated tax rate is attributable to changed profits of the Group companies in the respective fiscal jurisdictions and to changes in their tax rates in some cases.

9. ACCOUNTS PAYABLE CHF 605.4 MN (CHF 557.9 MN) Accounts payable do not bear interest and will usually become due within 30 to 60 days.

10. ACCRUED EXPENSES AND DEFERRED INCOME CHF 214.3 MN (CHF 204.6 MN) Deferred income and accrued expenses relate to outstanding invoices and liabilities of the current year, including performance- based compensation payable to employees in the following year and social security expenses.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 105 11. OTHER LIABILITIES CHF 51.5 MN (CHF 59.0 MN)

OTHER CURRENT LIABILITIES in CHF mn 2013 2014

Derivatives (at fair value through profit and loss) 1.1 15.0 Bank loans 11.1 5.7 Other 22.5 14.1 Other financial liabilities 34.7 34.8

A number of Group companies have their own credit lines. The total amount is insignificant in scale. The credit lines are used in individual cases when intra-Group financing is not permitted or there are benefits from local financing.

OTHER NON-CURRENT LIABILITIES in CHF mn 2013 2014

Bank loans 0.2 0.0 Other 24.1 16.7 Other financial liabilities 24.3 16.7

12. BONDS CHF 0.0 MN SHORT-TERM/CHF 947.6 MN LONG-TERM (CHF 299.7 MN/CHF 946.9 MN) Sika AG has the following bonds outstanding: 2013 2014 in CHF mn Book value Nominal Book value Nominal

3.500% 2009 – 2014 299.7 300.0 0.0 0.0 2.875% 2006 – 2016 249.0 250.0 249.4 250.0 1.000% 2012 – 2018 149.6 150.0 149.7 150.0 1.125% 2013 – 2019 199.5 200.0 199.6 200.0 1.750% 2012 – 2022 149.9 150.0 149.9 150.0 1.875% 2013 – 2023 198.9 200.0 199.0 200.0

Total 1,246.6 1,250.0 947.6 950.0

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 106 13. PROVISIONS CHF 116.1 MN (CHF 115.0 MN) Provisions for guarantees reflect all known claims anticipated in the near future. The amounts of the provision are determined on the basis of experience and are therefore subject to a degree of uncertainty. The outflow of funds depends on the timing of the filing and conclusion of warranty claims. Provisions for sundry risks include loan guarantees as well as open and anticipated legal and tax cases with a probability of occurrence above 50%.

From the sum of provisions, CHF 96.9 million (CHF 93.0 million) are shown as non-current liabilities, since an outflow of funds is not expected within the next twelve months.

For provisions of CHF 19.2 million (CHF 22.0 million), an outflow of funds is expected during the next twelve months. These amounts are shown as current provisions.

Provisions in CHF mn Warranties Sundry risks Total

Current provisions 15.7 3.5 19.2 Non-current provisions 72.7 24.2 96.9 Provisions 88.4 27.7 116.1

Reconciliation At January 1, 2014 86.0 29.0 115.0 Additions 24.5 9.9 34.4 Assumed on acquisition 0.6 0.5 1.1 Exchange differences 2.9 -0.5 2.4 Utilization -18.2 -6.2 -24.4 Reversal -7.4 -5.0 -12.4

At December 31, 2014 88.4 27.7 116.1

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 107 14. EMPLOYEE BENEFIT OBLIGATION To complement the benefits provided by state-regulated pension schemes, Sika maintains additional employee pension plans for a number of subsidiaries. In principle these fall into the following categories:

DEFINED CONTRIBUTION PENSION FUNDS. The majority of Sika subsidiaries operate defined contribution pension plans. In these, employees and employer regularly contribute to funds administered by third parties. This does not give rise to any assets or liabilities in the consolidated balance sheet.

DEFINED BENEFIT PENSION FUNDS. Defined benefit pension plans for staff exist at 40 Group companies. The biggest plans are in Switzerland, accounting for 80.4% (80.1%) of Sika’s entire defined benefit pension obligations and 96.0% (96.5%) of plan assets.

SWISS PENSION PLANS. Sika companies in Switzerland have legally independent foundations for this purpose, thereby segregating their pension obligation liabilities. In accordance with local statutory requirements, Sika has no obligations to these pension plans beyond the regulatory contributions and any recapitalization contributions that may become necessary. According to IAS 19, the Swiss pension plans qualify as defined benefit plans, so the actuarially calculated surplus or deficit is recognized in the consolidated balance sheet.

The supreme governing body of the pension fund is composed of equal numbers of employee and employer representatives. There is also a management pension scheme and a welfare foundation, which provide statutory benefits, and a scheme that enables employees to take early retirement.

Both the Sika pension fund and the welfare foundation bear the investment risks and the age risk themselves. As the supreme governing body of the pension fund, the Board of Trustees is responsible for investment. The investment strategy is defined so as to ensure that the benefits can be provided when they become due. The pension fund has concluded a contract for matching reinsurance for the risks of death and invalidity. The insurance-related and investment risks of the management pension scheme are fully reinsured. The retirement pension is calculated using the retirement assets available at the time of retirement multiplied by the conversion rates specified in the regulations. The employee has the opportunity to withdraw pension benefits in the form of a lump sum.

The Federal Law on Occupational Retirement, Survivors’, and Disability Pensions (BVG) governs the way in which employees and employer must jointly participate in any restructuring measures in the event of a significant deficit, such as by making additional contributions. In the current year, as in the previous year, the Swiss pension plans are showing a surplus under BVG and it is not expected that additional contributions will be necessary for the next year.

Last year the benefits of the insurance plan were adjusted by reducing the conversion rate and increasing the savings contributions. This led to an adjustment in the pension plan and is therefore recognized in the income statement as a gain on a plan curtailment (CHF 18.9 million).

2013 2014 in CHF mn Assets Liabilities Net Assets Liabilities Net

Employee benefit plans with defined benefits 14.1 162.1 148.0 13.9 246.9 233.0 Other employee commitments 50.8 50.8 56.9 56.9

Total 14.1 212.9 198.8 13.9 303.8 289.9

Other long-term liabilities arise from long-service bonuses and similar benefits that Sika grants to its employees.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 108 MOVEMENT IN THE NET DEFINED BENEFIT OBLIGATION

Present value Fair value Impact Total in CHF mn of obligation of plan assets of asset ceiling

At January 1, 2013 -750.2 540.1 -2.6 -212.7 Current service cost -28.6 -28.6 Interest expense/interest income -17.8 11.6 -6.2 Past service cost and gains and losses on settlements and curtailments 19.2 19.2 Total expense recognized in income statement -27.2 11.6 -15.6 thereof Switzerland -18.7 11.1 -7.6 thereof Others -8.5 0.5 -8.0

Return on plan assets, excluding amounts included in interest income 37.5 37.5 Gain from change in financial assumptions 14.1 14.1 Gain from change in demographic assumptions 2.6 2.6 Experience gain 8.3 8.3 Change in asset ceiling 1.7 1.7 Total remeasurements recognized in other comprehensive income 25.0 37.5 1.7 64.2 thereof Switzerland 30.1 37.6 1.7 69.4 thereof Others -5.1 -0.1 – -5.2

Exchange differences 1.6 -0.3 1.3 Contributions by employers 17.5 17.5 Contributions by plan participants -11.1 11.1 - Benefits paid 35.9 -29.6 6.3 Acquired in a business combination and others -16.3 7.3 -9.0 At December 31, 2013 -742.3 595.2 -0.9 -148.0 thereof Switzerland -594.7 574.3 -0.9 -21.3 thereof Others -147.6 20.9 – -126.7

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 109 Present value Fair value Impact Total in CHF mn of obligation of plan assets of asset ceiling

At January 1, 2014 -742.3 595.2 -0.9 -148.0 Current service cost -26.0 -26.0 Interest expense/interest income -18.8 14.2 -4.6 Past service cost and gains and losses on settlements and curtailments 3.7 3.7 Total expense recognized in income statement -41.1 14.2 -26.9 thereof Switzerland -34.8 13.4 -21.4 thereof Others -6.3 0.8 -5.5

Return on plan assets, excluding amounts included in interest income 19.3 19.3 Loss from change in financial assumptions -106.5 -106.5 Loss from change in demographic assumptions -4.2 -4.2 Experience gain 6.9 6.9 Change in asset ceiling -1.4 -1.4 Total remeasurements recognized in other comprehensive income -103.8 19.3 -1.4 -85.9 thereof Switzerland -81.8 18.2 -1.4 -65.0 thereof Others -22.0 1.1 – -20.9

Exchange differences 2.5 -0.3 2.2 Contributions by employers 21.5 21.5 Contributions by plan participants -11.7 11.7 - Benefits paid 24.5 -19.9 4.6 Acquired in a business combination and others -3.4 2.9 -0.5 At December 31, 2014 -875.3 644.6 -2.3 -233.0 thereof Switzerland -704.1 619.1 -2.3 -87.3 thereof Others -171.2 25.5 – -145.7

The contributions that are expected to be paid into the defined benefit pension plans for 2015 amount to CHF 18.1 million.

The Group’s total expenses for employee benefits are included in the Consolidated Financial Statements under “Personnel expenses”.

The stated deficit results partly from the defined benefit obligation of the unfunded benefit plans of CHF 129.7 million (CHF 105.9 million). The schemes in Germany, in particular, do not have segregated assets.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 110 MAJOR CATEGORIES OF TOTAL PLAN ASSETS 2013 2014 Switzerland Others Total Switzer- Others Total in CHF mn land

Cash and cash equivalents 38.2 13.4 51.6 36.3 14.4 50.7 Equity instruments 194.9 1.5 196.4 214.0 2.2 216.2 Debt instruments 242.1 1.5 243.6 261.7 2.7 264.4 Real estate investments 96.6 0.0 96.6 102.8 0.5 103.3 Other assets 2.5 4.5 7.0 4.3 5.7 10.0

Total 574.3 20.9 595.2 619.1 25.5 644.6

Most of the plan assets of the pension schemes are invested in assets with quoted market prices. In the year under review, 14.1% (16.7%) of the investments in real estate and 19.0% (25.7%) of the other assets did not have a quoted market price.

AMOUNTS INCLUDED IN PLAN ASSETS in CHF mn 2013 2014

Shares Sika AG 14.6 15.0 Own property occupied by Sika 7.7 7.7

Total 22.3 22.7

ACTUARIAL ASSUMPTIONS (WEIGHTED AVERAGE) 2013 2014 Switzer- Others Switzer- Others land land

Discount rate in the year under review (%) 2.3 3.4 1.4 2.4

THE SENSITIVITY OF THE DEFINED BENEFIT OBLIGATION TO CHANGES IN THE PRINCIPAL ASSUMPTIONS in CHF mn Change in assumption Impact on defined benefit obligation Switzerland Others

Discount rate +0.25% -31.3 -6.5 Discount rate -0.25% 33.7 5.0

NUMBER OF PLANS AND INSURED PERSONS 2013 2014 Switzer- Others Switzer- Others land land

Number of insured employees 1,943 3,775 1,967 3,754 Number of insured retired persons 445 1,208 434 1,189 Total number of defined benefit plans 5 36 5 35 thereof number of defined benefit plans funded 4 11 4 11 thereof number of defined benefit plans unfunded 1 25 1 24 Average weighted duration in years 17.0 15.1 18.2 15.9

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 111 15. SHAREHOLDERS’ EQUITY CHF 2,383.3 MN (CHF 2,136.2 MN) Equity accounts for 49.5% (45.1%) of the balance sheet total.

CAPITAL STOCK in CHF mn Number 2013 2014

Registered shares, nominal value CHF 0.10 2 333 874 0.2 0.2 Bearer shares, nominal value CHF 0.60 2 151 199 1.3 1.3

Capital stock 1.5 1.5

The Board of Directors proposes to the Annual General Meeting payment of a dividend of CHF 12.00 per registered share and of CHF 72.00 per bearer share, in the total amount of CHF 182.6 million, to the shareholders of Sika AG.

The capital stock is divided into the following categories:

Bearer shares 1 Registered shares Total 1 nominal value CHF 0.60 nominal value CHF 0.10

12/31/2013 (units) 2,151,199 2,333,874 4,485,073 Nominal value (CHF) 1,290,719 233,387 1,524,107

12/31/2014 (units) 2,151,199 2,333,874 4,485,073 Nominal value (CHF) 1,290,719 233,387 1,524,107

1 Includes treasury shares 4,261 units (6,519 units) which do not carry voting and dividend rights.

16. NET SALES CHF 5,571.3 MN (CHF 5,142.2 MN) Sales of goods account for practically all net sales. In comparison with the previous year, net sales denominated in Swiss francs increased by 8.3%. Taking currency effects amounting to -4.7% into consideration, sales increased in local currencies by 13.0%, including a growth from acquisitions of 5.7%.

Revenue from construction contracts in the year under review amounted to CHF 3.9 million (CHF 4.1 million). On the balance sheet date accrued construction costs and recognized profits (less recognized losses) were CHF 31.9 million (CHF 122.9 million). On the balance sheet date, as in the previous year, there were insignificant receivables and no liabilities from construction contracts. Contract revenues and contract costs are recognized as income and expenses by reference to the stage of completion.

17. MATERIAL EXPENSES CHF 2,620.0 MN (CHF 2,446.6 MN) Material expenses decreased as a percentage of net sales by 0.6 percentage points.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 112 18. OPERATING PROFIT BEFORE DEPRECIATION CHF 798.3 MN (CHF 675.9 MN) In the year under review the moderate material price increases and the good price and product management led to an improvement in gross result from 52.4% to 53.0%.

Operational costs were at a slightly lower level. Thanks to a further increase in efficiency the personnel expenses increased below average despite the desired expansion in growth markets and the positive one-off effect last year. Other operating expenses developed disproportionately low as well due to disciplined cost management.

The purchase price of an acquisition in 2011 included a contingent consideration upon the course of business. In the year under review the liability was reduced by CHF 3.4 million and deducted from other operating expenses.

Expenditures on research and development in the Group in the year under review totaled CHF 167.7 million (CHF 166.1 million), roughly equivalent to 3.0% (3.2%) of sales. Research and development expenses are included in operating costs. in CHF mn 2013 2014

Gross result 2,695.6 2,951.3 Personnel expenses -1,031.1 -1,093.7 Other operating expenses -988.6 -1,059.3

Operating profit before depreciation 675.9 798.3

PERSONNEL EXPENSES in CHF mn 2013 2014

Wages and salaries 849.1 893.6 Social charges 182.0 200.1

Personnel expenses 1,031.1 1,093.7

EMPLOYEE BENEFIT COSTS in CHF mn 2013 2014

Employee benefit plans with defined benefits 1 9.4 22.3 Other employee benefit plans 35.7 32.2

Employee benefit costs 45.1 54.5

1 Includes pension expense recognized in income statement (according to note 14) without interest income/interest expenses.

EMPLOYEE PARTICIPATION PLAN – SHARE-BASED PAYMENTS Sika operates the following share-based compensation plans:

PERFORMANCE BONUS (SHORT-TERM INCENTIVE). Senior managers and Group Management receive shares of Sika AG as a component of their salary. The shares are granted at the average market price of February of the subsequent business year. The allocated shares are subject to a blocking period of four years. The following different share plans are in place:

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 113 Senior managers may draw optionally 20% or 40% of the performance-based short-term variable remunerations in the form of shares of Sika AG. As remuneration for the services rendered by them in 2013, in 2014 they drew 719 shares at a fair value of CHF 2.3 million (CHF 3,164 per share). In 2013, the fair value of the compensation for 2012 amounted to CHF 1.9 million (815 shares at CHF 2,308).

The performance-based portion of the short-term variable remunerations for Group Management is paid out 20% in the form of shares of Sika AG. Moreover, members of Group Management have an option to draw a further 20% of the variable remunerations in the form of shares of Sika AG. As compensation for the services rendered by them in 2013, in 2014 they drew 560 shares at a fair value of CHF 1.8 million (CHF 3,164 per share). In 2013, the fair value of the compensation for 2012 amounted to CHF 1.8 million (765 shares at CHF 2,308).

LONG-TERM INCENTIVE (LTI-PLAN). The performance-based portion of the long-term variable remuneration for Group Management is paid out in full in shares of Sika AG and is conditional upon a three-year vesting period and an additional four-year blocking period. In 2014, 1,445 shares at a fair value of CHF 5.0 million (CHF 3,479 per share) were allocated to the members of Group Management as part of the long-term compensation program. In 2013, the fair value of the compensation for 2012 amounted to CHF 2.1 million (899 shares at CHF 2,308).

SHARES FOR BOARD OF DIRECTORS. The members of the Board of Directors receive shares of Sika AG as a component of their compensation. The shares are subject to a blocking period of four years. In this term of office from April 2013 to April 2014 322 shares at a fair value of CHF 1.1 million (CHF 3,479 per share) were allocated to the members of the Board of Directors. In the prior year period the compensation amounted to CHF 1.0 million (458 shares at CHF 2,133).

Share-based remunerations are made by means of the transfer of treasury shares of Sika AG. The personnel expenses recognized for services received in the 2014 business year totaled CHF 27.0 million (CHF 24.3 million) of which the amount of CHF 10.3 million (CHF 6.4 million) was taken to equity and the amount of CHF 16.7 million (CHF 17.9 million) was recognized under liabilities. Provided employees are entitled to the option of drawing shares of Sika AG, this portion will be recognized under liabilities as at the balance sheet date, and in the event that shares are drawn, this portion will be taken to equity in the subsequent year. In the year under review the fair value of the allocated shares taken to shareholders’ equity amounted to CHF 1.8 million (CHF 1.7 million).

No dilution effect results because no additional shares have been issued.

19. DEPRECIATION AND AMORTIZATION EXPENSES CHF 165.1 MN (CHF 152.4 MN) The amount includes the regular depreciation and amortization, which increased proportionally to the acquisition costs.

20. INTEREST EXPENSES/OTHER FINANCIAL EXPENSES CHF 52.1 MN (CHF 56.7 MN) This item consists mainly of interest expenses for bond issues outstanding in the amount of CHF 22.8 million (CHF 24.5 million) as well as gains and losses from foreign currency transactions and the hedging of loans.

21. INTEREST INCOME/OTHER FINANCIAL INCOME/INCOME FROM ASSOCIATED COMPANIES CHF 9.5 MN (CHF 9.9 MN) Short-term surpluses in liquidity in various countries led to interest income of CHF 2.7 million (CHF 3.0 million). Income from associated companies amounted to CHF 1.2 million (CHF 1.1 million). Other financial income decreased slightly to CHF 5.6 million (CHF 5.8 million).

22. NON-CONTROLLING INTERESTS CHF 2.2 MN (CHF 2.5 MN) Most important companies with non-controlling interests: –– Sika Arabia Holding Co. WLL, Bahrain (49%) –– Sika UAE LLC, UAE (49%) –– Sika Saudi Arabia Co. Ltd., Saudi Arabia (49%) –– Sika International Chemicals LLC Abu Dhabi, UAE (49%) –– Sika Gulf B.S.C., Bahrain (49%) –– Hebei Jiuqiang Construction Material Co. Ltd., China (15%)

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 114 23. EARNINGS PER SHARE CHF 173.19 (CHF 135.27)

2013 2014

Undiluted (“basic EPS”) Net profit (in CHF mn) 342.2 439.0 Weighted average number of shares 1 Bearer shares 2/units 2,140,691 2,145,809 Registered shares 3/units 2,333,874 2,333,874 Earnings per share Bearer share 2/CHF 135.27 173.19 Registered share 3/CHF 22.55 28.87

1 Excluding treasury shares held in the Group. 2 Nominal value: CHF 0.60. 3 Nominal value: CHF 0.10.

Earnings per share (EPS) amount to CHF 173.19 (CHF 135.27). The EPS calculated on the basis of net profit after non-controlling interests and the number of shares entitled to dividend, weighted over the course of the year. No dilution effect results because no options or convertible bonds are outstanding. For the business year 2013 the dividend amounted to CHF 57.00 per bearer share and to CHF 9.50 per registered share.

24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The financial instruments and the related risk management of the Sika Group are presented in this note.

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES 2013 2014 Level Book Fair Book Fair in CHF mn value value value value

Financial assets Cash and cash equivalents 1,028.3 898.8 Loans and receivables 919.5 1,010.3 Financial assets at fair value through profit and loss 1 26.4 26.4 31.6 31.6 Financial assets at fair value through profit and loss (derivatives) 2 10.9 10.9 1.2 1.2

Total 1,985.1 1,941.9

Financial liabilities Bank overdrafts 11.3 5.7 Bonds 1 1,246.6 1,269.1 947.6 989.0 Accounts payable 557.9 605.4 Other financial liabilities 46.6 30.8 Financial liabilities measured at amortized cost 1,862.4 1,589.5 Financial liabilities at fair value through profit and loss (derivatives) 2 1.1 1.1 15.0 15.0

Total 1,863.5 1,604.5

The book value of cash and cash equivalents, loans and receivables, bank overdrafts, accounts payable, and other financial liabilities almost equals the fair value.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 115 The hierarchy below classifies financial instruments, by valuation method. The different levels have been defined as follows: –– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. –– Level 2: procedures in which all input parameters having an essential effect on the registered market value are either directly or indirectly observable. –– Level 3: procedures applying input parameters having an essential effect on the registered market value but are not based on observable market data.

Sika does not own any financial instruments requiring evaluation according to level 3 procedures.

A net loss of CHF 23.6 million (net loss of CHF 6.7 million) on financial assets and liabilities held at fair value through profit or loss was recognized in the income statement under other financial expenses.

MANAGEMENT OF FINANCIAL RISKS BASIC PRINCIPLES. The Group’s activities expose it to a variety of financial risks: market risks (primarily foreign exchange risks, price risks, and interest rate risks), credit risks, and liquidity risks. The Group’s financial risk management program focuses on hedging volatility risks.

The Corporate Finance Department identifies, evaluates, and hedges financial risks in close cooperation with the Group’s operating units.

TO SECURE OWN OBLIGATIONS, PLEDGED OR CEDED ASSETS (ENCUMBERED ASSETS) in CHF mn 2013 2014

Receivables 1.8 1.9 Property, plant, and equipment 0.7 0.7

Total book value of encumbered assets 2.5 2.6

OPEN DERIVATIVES Contractual value upon maturity Replacement value Contract Up to 3 to 12 value 3 months months in CHF mn (+) (-)

Open derivatives 2013 Forward contracts (foreign exchange) 0.1 -0.2 27.5 14.8 12.7 Swaps (foreign exchange) 10.8 -0.9 1,093.8 292.1 801.7

Total derivatives 10.9 -1.1 1,121.3 306.9 814.4

Open derivatives 2014 Forward contracts (foreign exchange) 0.3 -0.2 5.3 5.3 0.0 Swaps (foreign exchange) 0.9 -14.8 993.8 315.4 678.4

Total derivatives 1.2 -15.0 999.1 320.7 678.4

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 116 FOREIGN EXCHANGE RISKS. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the euro and the US dollar. Foreign exchange risk arises when commercial transactions as well as recognized assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The Group makes every effort to offset the impact of exchange rate movements as far as possible by utilizing natural hedges. Foreign exchange forward contracts/swaps are used to hedge foreign exchange risks. Gains and losses on foreign exchange hedges and assets or liabilities carried at fair value are recognized through profit or loss. The Group does not apply hedge accounting.

Sika carries out a sensitivity analysis for the dominant foreign currencies euro and US dollar. The assumed possible currency fluctuations are based on historical observations and future prognoses. Incorporated into calculations are the financial instruments, Group-internal financing, and foreign currency hedge transactions in the corresponding currencies. The following table demonstrates the sensitivity of consolidated net profit before tax to a reasonably possible shift in exchange rates related to financial instruments held in the balance sheet. All other variables are held constant. The impact on shareholders’ equity is insignificant.

CURRENCY AND ASSUMED RATE OF CHANGE AGAINST CHF Impact on profit before tax in CHF mn 2013 2014

EUR: +10% -0.5 1.3 EUR: -10% 0.5 -1.3 USD: +10% -14.0 -13.6 USD: -10% 14.0 13.6

PRICE RISKS. The Group is exposed to purchasing price risks because cost of materials represents one of the Group’s largest cost factors. Purchasing prices are influenced far more by the interplay between supply and demand, the general economic environment, and intermittent disruptions of processing and logistics chains, ranging from crude oil to purchased merchandise, than by crude oil prices themselves. Short-term crude oil price increases only have limited impact on raw material prices. Sika limits market price risks for important products by means of maintaining corresponding inventories and Group contracts (lead buying). The most important raw materials are polymers such as polyurethane, epoxy resins, polyvinyl chloride and cementitious basic materials. Other measures such as hedging are not practical because there is no corresponding market for these semi- finished products.

INTEREST RATE RISK. Interest rate risks result from changes in interest rates, which could have a negative impact on the Group’s financial position, cash flow and earnings situation. Interest rate risk is limited through emission of fixed interest long-term bonds (nominal CHF 950 million). A change in the rate of interest would therefore alter neither annual financial expenses nor shareholders’ equity materially. Local bank loans and mortgages are insignificant. Interest rate development is closely monitored by management.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 117 CREDIT RISK. Credit risks arise from the possibility that the counterparty to a transaction may not be able or willing to discharge its obligations, thereby causing the Group to suffer a financial loss. Counterparty risks are minimized by only concluding contracts with reputable business partners and banks. In addition, receivable balances are monitored on an ongoing basis via internal reporting procedures. Potential concentrations of risks are reduced by the large number of customers and their geographic dispersion. No customer represents more than 1.5% of the Group’s net sales. The Group held no securities for loans and accounts receivable at year-end 2013 nor at year-end 2014. The largest possible risk represented by these items is the carrying amount of the accounts receivable and any warranties granted.

LIQUIDITY RISK. Liquidity risk refers to the risk of Sika no longer being able to meet its financial obligations in full. Prudent liquidity management includes maintaining sufficient cash and cash equivalents and securing the availability of liquidity reserves which can be called up at short notice. Group Management monitors the Group’s liquidity reserve on the basis of expected cash flows.

The table below summarizes the maturity profile of the Group’s financial liabilities at the balance sheet date based on contractual undiscounted payments.

MATURITY PROFILE OF FINANCIAL LIABILITIES Less than Between 1 Over Total in CHF mn 1 year and 5 years 5 years

December 31, 2013 Bank loans 11.1 0.2 0.0 11.3 Bonds 327.8 454.9 581.5 1,364.2 Accounts payable 557.9 0.0 0.0 557.9 Other financial liabilities 22.5 23.8 0.3 46.6 Financial liabilities measured at amortized cost 919.3 478.9 581.8 1,980.0 Financial liabilities at fair value through profit and loss 1.1 0.0 0.0 1.1

Total 920.4 478.9 581.8 1,981.1

December 31, 2014 Bank loans 5.7 0.0 0.0 5.7 Bonds 17.3 646.2 372.9 1,036.4 Accounts payable 605.4 0.0 0.0 605.4 Other financial liabilities 14.1 7.8 8.9 30.8 Financial liabilities measured at amortized cost 642.5 654.0 381.8 1,678.3 Financial liabilities at fair value through profit and loss 15.0 0.0 0.0 15.0

Total 657.5 654.0 381.8 1,693.3

CAPITAL MANAGEMENT. The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy equity ratios in order to support its business. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. No changes were made in the objectives, policies or processes during the years ended December 31, 2014 and December 31, 2013. The Group monitors its equity using the equity ratio, which is shareholder’s equity divided by total capital.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 118 25. FUTURE OBLIGATIONS RAW MATERIAL SUPPLY CONTRACTS. Sika concludes collective lead-buying purchase contracts at Group level for important raw materials.

DELIVERY CONTRACTS FOR FINISHED GOODS. Supply contracts are in place with major customers. No other future obligations in excess of normal business activities existed as of the date of this report. in CHF mn 2013 2014

Raw material supply contracts 1 158 233 Delivery contracts for finished goods 1 324 276

1 Contracts run until 2023, maximum.

CONTINGENT LIABILITIES. Given the Group’s international operations, there are inherent tax risks which cannot be conclusively estimated. In ongoing business activity the Group may be involved in legal proceedings such as lawsuits, claims, investigations, and negotiations due to product liability, mercantile law, environmental protection, health, and safety, etc. There are no current proceedings of this nature pending which could have significant influence on business operations, on the Group’s financial position or income. The Group is active in countries in which political, economic, social, and legal developments could impair business activity. The effects of such risks which can occur in the normal course of business is unforeseeable. In addition, their probability of occurrence lies below 50%. in CHF mn 2013 2014

Guarantees and letters of comfort 20 21

If guarantees were claimed at the earliest possible date, then all would be due within one year.

26. CASH FLOW STATEMENT DETAILS TO THE CASH FLOW STATEMENT. Compared with the previous year, cash flow was influenced by: –– higher consolidated net profit before tax (CHF 113.9 million) –– a larger increase in net working capital (CHF -99.2 million) –– a significant lower acquisition activity (CHF 342.1 million) –– a net outflow instead of net borrowings from bonds (CHF -448.3 million) in CHF mn 2013 2014

Operating activities 574.0 554.4 Investment activities -555.0 -204.6 Financing activities 23.9 -480.0 Exchange differences -8.8 0.7

Net change in cash and cash equivalents 34.1 -129.5

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 119 FREE CASH FLOW AND OPERATING FREE CASH FLOW in CHF mn 2013 2014

Cash flow from operating activities 574.0 554.4 Net investment in Property, plant, and equipment -131.0 -129.7 Intangible assets -10.3 -7.2 Acquisitions less cash and cash equivalents -410.9 -68.8 Acquisitions (-) / disposals (+) of financial assets -2.8 1.1 Free cash flow 19.0 349.8 Acquisitions / disposals less cash and cash equivalents 410.9 68.8 Acquisitions (+) / disposals (-) of financial assets 2.8 -1.1

Operating free cash flow 432.7 417.5

OTHER ADJUSTMENTS. Included in “Other adjustments” are: in CHF mn 2013 2014

Non-liquidity-related interest expenses / income -4.0 -6.1 Non-liquidity-related financial expenses / income 2.4 0.6 Profit / loss from disposals of PPE 1.2 -1.6 Personnel expenses settled through treasury shares 6.8 10.3 Others -0.3 0.1

Total 6.1 3.3

27. SEGMENT REPORTING Sika conducts its worldwide activities according to regions. Heads of regions are members of Group Management. Group Management is the highest operative executive body measuring the profit and loss of segments and allocating resources. The key figure of profit by which the segments are directed is that of operating profit, which stands in correlation with the Consolidated Financial Statements. The financing (including financial expenditures and revenues) as well as income taxes are managed uniformly across the Group and are not assigned to the individual segments. The composition of the regions is shown on page 45 of the download pdf of this report.

Products and services from all product groups are sold in all regions. Customers derive from the building and construction industry or from the area of industrial manufacturing. Sales are assigned according to company locations. Taxes and any effects of financing are allocated to other segments and activities. Transfer prices between segments are calculated according to generally accepted principles.

“Other segments and activities” include the automotive segment, expenditures for Group head quarter, and its proceeds from services. In addition they contain expenses and income that cannot be allocated to an individual region.

A change in internal reporting practice was implemented effective January 1, 2014. Certain internal allocations were no longer charged to the segment results. Essentially, these internal allocations are understood to be the charges for central marketing as well as production support. In keeping with internal reporting practice, the segment reporting presented here has been adjusted accordingly. The prior-year figures have been restated to allow like-for-like comparison.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 120 The acquired LCS Optiroc Pte Ltd, Singapore, LCS Optiroc SDN. BHD, Malaysia as well as the business in Gunsan, South Korea were assigned to region Asia/Pacific. Lwart Quimica Ltda., Brazil was assigned to region Latin America and Klebag AG, Switzerland was assigned to region EMEA.

NET SALES 2013 2014 With third With other Total With third With other Total in CHF mn parties segments parties segments

EMEA 2,470.2 102.6 2,572.8 2,734.0 110.7 2,844.7 North America 711.2 18.3 729.5 746.3 22.3 768.6 Latin America 622.8 0.2 623.0 638.6 0.3 638.9 Asia/Pacific 973.7 5.0 978.7 1,039.7 5.6 1,045.3 Other segments and activities 364.3 – 364.3 412.7 – 412.7 Eliminations – -126.1 -126.1 -138.9 -138.9

Net sales 5,142.2 – 5,142.2 5,571.3 – 5,571.3 Products for construction industry 4,150.1 4,506.6 Products for industrial manufacturing 992.1 1,064.7

CHANGES IN NET SALES/CURRENCY IMPACT 2013 2014 Change compared to prior year (+/- in %) In Swiss In local Currency in CHF mn francs currencies impact

By region EMEA 2,470.2 2,734.0 10.7 13.3 -2.6 North America 711.2 746.3 4.9 7.9 -3.0 Latin America 622.8 638.6 2.5 16.0 -13.5 Asia/Pacific 973.7 1,039.7 6.8 12.9 -6.1 Other segments and activities 364.3 412.7 13.3 16.2 -2.9

Net sales 5,142.2 5,571.3 8.3 13.0 -4.7 Products for construction industry 4,150.1 4,506.6 8.6 13.4 -4.8 Products for industrial manufacturing 992.1 1,064.7 7.3 11.1 -3.8

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 121 OPERATING PROFIT 2013 2014 Change compared to prior year in CHF mn Restated (+/-) (+/- in %)

By region EMEA 280.6 369.1 88.5 31.5 North America 89.3 102.8 13.5 15.1 Latin America 116.2 114.3 -1.9 -1.6 Asia/Pacific 138.6 152.9 14.3 10.3 Other segments and activities -101.2 -105.9 -4.7 n.a.

Operating profit 523.5 633.2 109.7 21.0

RECONCILIATION OF SEGMENT RESULT AND NET PROFIT in CHF mn 2013 2014

Operating profit 523.5 633.2 Interest income 3.0 2.7 Interest expenses -33.9 -30.5 Other financial income 5.8 5.6 Other financial expenses -22.8 -21.6 Income from associated companies 1.1 1.2 Profit before taxes 476.7 590.6 Income taxes -132.0 -149.4

Net profit 344.7 441.2

2013 2014 Depreciation Impairment Capital Depreciation Impairment Capital expendi- expendi- in CHF mn tures tures

EMEA 79.0 0.0 75.0 84.8 0.0 71.0 North America 23.0 0.0 10.8 21.5 0.0 12.1 Latin America 9.4 0.0 27.2 10.5 0.0 24.8 Asia/Pacific 20.9 0.0 24.9 23.1 0.0 23.9 Other segments and activities 20.1 0.0 16.0 25.2 0.0 20.9

Total 152.4 0.0 153.9 165.1 0.0 152.7

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 122 The following countries had a share of greater than 10% of at least one of corresponding Group key figures:

Net sales Non-current assets 1 in CHF mn 2013 % 2014 % 2013 % 2014 %

Switzerland 306.3 6.0 298.1 5.4 483.1 24.1 511.3 25.0 USA 679.0 13.2 731.3 13.1 206.1 10.3 224.7 11.0 Germany 603.8 11.7 710.3 12.7 303.2 15.2 270.7 13.2 All other 3,553.1 69.1 3,831.6 68.8 1,008.6 50.4 1,040.6 50.8

Total 5,142.2 100.0 5,571.3 100.0 2,001.0 100.0 2,047.3 100.0

1 Non-current assets less financial assets, deferred tax assets and employee benefit assets.

28. RELATED PARTIES As of balance sheet date of December 31, 2014, Sika had two significant shareholders with a share of voting rights of over 3.0%: the group formed by the Burkard-Schenker family and Compagnie de Saint-Gobain, Courbevoie, which according to information provided by the family as at December 31, 2014, holds 52.9% of all share votes, mainly through the Schenker-Winkler Holding AG, Baar and BlackRock Inc., New York, which holds 3.25% of all share votes.

ASSOCIATED COMPANIES. In the year under review goods and services totaling CHF 17.5 million (CHF 17,2 million) were delivered to associated companies. These transactions occurred on the usual conditions between wholesale partners. In the previous year, Sika sold a property to an associated company. The sales price amounted to CHF 3.8 million.

EMPLOYEE BENEFIT PLANS. In Switzerland, employee benefit plans are handled through independent foundations, to which a total of CHF 22.7 million (CHF 20.5 million) was paid in the year under review. As of the balance sheet date no material receivables or payables were due from these foundations. Sika offices are located in a building leased from the pension fund foundation. Rent for 2014 amounted to CHF 0.6 million (CHF 0.5 million). Furthermore, in 2013 revenue from renovation of this building amounted to CHF 0.3 million.

MEMBERS OF THE BOARD OF DIRECTORS. In the year under review property, plant, and equipment in the amount of CHF 0.3 million (CHF 0.1 million) were acquired from a company of a member of the Board of Directors. Furthermore, in 2013 services in the amount of CHF 0.6 million were bought from a member of the Board of Directors.

All transactions were conducted at market conditions.

29. REMUNERATION OF THE BOARD OF DIRECTORS AND GROUP MANAGEMENT For the business year 2014 (2013), the Board of Directors and Group Management are entitled to the following remuneration: in CHF mn 2013 2014

Current benefits 1 8.7 8.9 Share-based payments 2 9.8 9.7 Pension benefits 1.0 0.9

Total 19.5 19.5

1 The prior year disclosure was restated by cost allowances for the international assignees, such as tax equalization payments, housing, schooling and home leave. The financial statements remain unchanged. 2 Refer to note 18, employee participation plan – share-based payments.

Detailed information regarding remuneration of the Board of Directors and Group Management are included in the compensation report (as of page 61 of the download pdf of this report). Information regarding participations of the Board of Directors and Group Management in Sika AG can be found in note 20 of the Sika AG Financial Statements (as of page 141 of the download pdf of this report).

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 123 30. RELEASE OF FINANCIAL STATEMENTS FOR PUBLICATION The Board of Directors of Sika AG approved the Consolidated Financial Statements for publication on February 25, 2015. The financial statements will be submitted for approval to the Annual General Meeting on April 14, 2015.

31. EVENTS AFTER THE BALANCE SHEET DATE The following events occurred between December 31, 2014, and the release of these Consolidated Financial Statements:

On January 22, 2015 Sika has entered into exclusive negotiations with Axson management and shareholders to acquire Axson Technologies, a leader in the field of epoxy and polyurethane polymer formulations for design, prototyping and tooling, structural adhesives, composite materials, and encapsulation products for the automotive, nautical, renewable energy, sports & leisure, and construction markets. The transaction is subject to conditions including anti-trust approvals in certain jurisdictions as well as consultations with employee representatives. The contract will be signed only after publication of the Consolidated Financial Statements. Therefore, the purchase price as well as the precise details of the size and breakdown of the assets is still not known. Axson Technologies has annual sales of about CHF 75 million.

In January 2015, Sika has agreed to acquire the assets of Duro-Moza, Mozambique, a leading company active in production and sales of specialized mortars and tile adhesives in the Mozambique market. The transaction will close only after publication of the Consolidated Financial Statements and the precise details of the size and breakdown of the assets is still not known. For this reason, Sika decided against a provisional purchase price allocation. Duro-Moza has annual sales of about CHF 2 million.

On January 15, 2015, the Swiss National Bank announced to discontinue the minimum exchange rate of CHF 1.20 per euro. As a result, the Swiss francs appreciated strongly in value against the euro and other relevant currencies. The reported amounts in the Consolidated Financial Statements do not show any changes in foreign currencies after December 31, 2014. As the Group uses Swiss francs as presentation currency, the depreciation of the foreign currencies against the Swiss francs will have a negative impact on the reported Group result.

The risk management for foreign exchange risks, as well as the sensitivity of profit before tax against the dominant currencies are disclosed in note 24.

32. INFORMATION ON EXECUTION OF RISK ASSESSMENT Risk management is carried out by the Board of Directors of Sika AG and by Group Management. The Board of Directors is the highest authority for risk assessment. The Board assesses risks annually at the level of the Group and Sika AG. Group Management regularly reviews the processes which form the basis for risk management. The risk management process comprises four steps: risk identification, risk assessment, risk monitoring, and risk controlling.

Details regarding the assessment of risk management can be found in note 24 to the Consolidated Financial Statements.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 124 LIST OF GROUP COMPANIES

Country Company 1 Capital stock % holding Certifi- in thousands cation

EMEA (Europe, Middle East, Africa) Albania ✜ Sika Albania SHPK, Tirana ALL 40,471 100 Algeria ❏ Sika El Djazaïr SpA, Eucalyptus, Algiers DZD 313,400 100 ◆ Austria m Sika Österreich GmbH, Bludenz EUR 2,500 100 ◆ ★ Azerbaijan m Sika Limited Liability Comp., Baku CHF 250 100 ◆ Bahrain ❍ Sika Gulf B.S.C., Adliya BHD 1,000 51 ◆ ★ ✲ ▲ Sika Arabia Holding Company WLL, Adliya BHD 6,000 51 Belarus ✜ S I K A Bel LLC, Minsk BYR MN 1,846 100 Belgium m Sika Belgium NV, Nazareth EUR 2,500 100 ◆ ★ m Sika Automotive Belgium SA, Saintes EUR 1,649 100 ◆ ★ ✲ Bosnia- < Sika BH d.o.o. Sarajevo BAM 795 100 Herzegovina Bulgaria < Sika Bulgaria EOOD, Sofia BGL 340 100 ◆ ★ Croatia < Sika Croatia d.o.o., Zagreb HRK 4,000 100 ◆ ★ Czech Republic m Sika CZ, s.r.o., Brno CZK 30,983 100 ◆ ★ < Schönox s.r.o., Brno CZK 3,722 100 Denmark m Sika Danmark A/S, Farum DKK 5,000 100 ◆ ★ Egypt ❍ Sika Egypt for Construction Chemicals S.A.E., Cairo EGP 10,000 100 ◆ ★ ✲ ❍ Sika Manufacturing for Construction, S.A.E., Cairo EGP 2,000 100 ◆ ★ Estonia < Sika Estonia Oü, Tallinn EUR 3 100 Finland m Oy Sika Finland Ab, Espoo EUR 850 100 ◆ ★ < Casco Schönox Finland Oy, Vantaa EUR 1,504 100 France m Sika France SAS, Paris EUR 18,018 100 ◆ ★ m Cégécol snc, Antony Cedex EUR 5,095 100 ★ Germany s Sika Holding GmbH, Stuttgart EUR 26,000 100 ◆ ★ m Sika Deutschland GmbH, Stuttgart EUR 75 100 ◆ ★ m Sika Automotive GmbH, Hamburg EUR 5,300 100 ◆ ★ m Sika Trocal GmbH, Troisdorf EUR 4,000 100 ◆ ★ m Schönox GmbH, Rosendahl EUR 21,158 100 ◆ ★ z Tricosal Bauabdichtungs GmbH, Stuttgart EUR 50 100 Greece m Sika Hellas ABEE, Athens EUR 3,000 100 ◆ ★ ✲ Hungary < Sika Hungária Kft., Budapest HUF 483,000 100 ◆ ★ Iran ✜ Sika Parsian P.J.S. Co., Tehran IRR MN 3,000 100 Iraq m Sika for General Trading LLC, Erbil IQD 1,000 100 Ireland m Sika Ireland Ltd., Ballymun, Dublin EUR 635 100 ◆ s AKIS Ireland Ltd., Dublin CHF 10 100 Italy m Sika Italia S.p.A., Milan EUR 5,000 100 ◆ ★ m Sika Engineering Silicones S.r.l., Milan EUR 1,600 100 ◆ ★ m Sika Polyurethane Manufacturing S.r.l., Cerano EUR 1,600 100 ◆ ★ Ivory Coast < Sika Côte d,Ivoire SARL, Abidjan XOF 262,380 100 Jordan ✜ The Swiss Construction Chemicals Co. Ltd., Aqaba JOD 50 100 Kazakhstan m Sika Kazakhstan LLP, Almaty KZT 22,384 100 ◆ Kenya m Sika East Africa Ltd., Nairobi KES 50,000 100 Latvia m Sika Baltic SIA, Riga EUR 1,237 100

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 125 Country Company 1 Capital stock % holding Certifi- in thousands cation

Lebanon ❍ Sika Near East SAL, Beirut LBP 400 100 ◆ Mauritius ❍ Sika Mauritius Ltd., Plaine Lauzun MUR 2,600 100 Morocco ❍ Sika Maroc SA, Casablanca MAD 55,000 100 ◆ ★ ✲ Mozambique < Sika Moçambique Limitada, Maputo Cidade MZN 630 100 Netherlands m Sika Nederland B.V., Utrecht EUR 1,589 100 ◆ ★ s AKIS Netherlands B.V., Utrecht CHF 10 100 Nigeria < Sika Manufacturing Nigeria Limited, Lagos NGN 47,000 100 Norway m Sika Norge AS, Skjetten NOK 42,900 100 ◆ ★ Oman < Sika LLC, Muscat OMR 150 51 Pakistan m Sika Pakistan Ltd., Lahore PKR 82,959 100 Poland m Sika Poland Sp.z.o.o., Warsaw PLZ 12,188 100 ◆ ★ ✲ Portugal m Sika Portugal – Productos Construção Indústria SA, EUR 1,500 100 ◆ ★ Vila Nova de Gaia Qatar ✜ Sika Qatar LLC, Doha QAR 200 51 ◆ Romania m Sika Romania s.r.l., Brasov RON 1,285 100 ◆ ★ ✲ Russia m Sika LLC, Lobnya RUB 285,394 100 ◆ Saudi Arabia ❍ Sika Saudi Arabia Co Ltd., Riyadh SAR 41,750 51 ◆ ★ Serbia m Sika d.o.o. Beograd, Belgrad-Batajnica EUR 373 100 Slovakia < Sika Slovensko spol. s.r.o., Bratislava EUR 1,131 100 ◆ ★ Slovenia < Sika Slovenija d.o.o., Trzin EUR 1,029 100 ◆ ★ South Africa ❍ Sika South Africa (Pty) Ltd., Pinetown ZAR 25,000 100 ◆ ★ ✲ Spain m Sika SA, Alcobendas EUR 19,867 100 ◆ ★ Sweden m Sika Sverige AB, Spånga SEK 10,000 100 ◆ ★ < Casco Schönox Sweden AB, Stockholm SEK 50 100 Switzerland m Sika Schweiz AG, Zurich CHF 1,000 100 ◆ ★ ✲ s Sika Services AG, Zurich CHF 300 100 ◆ ★ ✲ s Sika Technology AG, Baar CHF 300 100 ◆ ★ s Sika Informationssysteme AG, Urdorf CHF 400 100 z SikaBau AG, Zurich CHF 5,300 100 ◆ s Sika Finanz AG, Baar CHF 2,400 100 m Sika Manufacturing AG, Sarnen CHF 14,000 100 ◆ ★ ✲ s Sika Supply Center AG, Sarnen CHF 1,000 100 ◆ ★ m Sika Automotive AG, Romanshorn CHF 3,000 100 ◆ ★ s Sika Europe Management AG, Zurich CHF 100 100 m Klebag AG, Ennetbürgen CHF 100 100 Tunisia ❏ Sika Tunisienne Sàrl, Douar Hicher TND 150 100 ◆ ★ Turkey m Sika Yapi Kimyasallari A.S., Istanbul TRY 6,700 100 ◆ ★ ✲ UAE m Sika UAE LLC, Dubai AED 1,000 51 ◆ ★ ✲ ✜ Sika FZCO, Dubai AED 500 100 ✜ Sika International Chemicals LLC, Abu Dhabi AED 300 51 Ukraine m LLC «Sika Ukraina», Kiev UAH 2,933 100 United Kingdom m Sika Ltd., Welwyn Garden City GBP 10,000 100 ◆ ★ ✲ m Everbuild Building Products Ltd., Leeds GBP 21 100 ◆ ★ m Incorez Ltd., Lancashire GBP 1 100 ◆ ★ ✲

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 126 Country Company 1 Capital stock % holding Certifi- in thousands cation

North America Canada ❍ Sika Canada Inc., Pointe Claire/QC CAD 5,600 100 ◆ ★ USA ❍ Sika Corporation, Lyndhurst/NJ USD 72,710 100 ◆ ★ ▲ Sarnafil Services Inc., Canton/MA USD 1 100 ★

Latin America Argentina ❍ Sika Argentina SAIC, Buenos Aires ARS 7,600 100 ◆ ★ ✲ Bolivia m Sika Bolivia SA, Santa Cruz de la Sierra BOB 1,800 100 ◆ Brazil ❍ Sika SA, São Paulo BRL 159,723 100 ◆ ★ ✲ ❍ Sika Automotive Ltda., São Paulo BRL 18,410 100 ★ ❍ Sika Quimica Ltda., São Paulo BRL 33,712 100 Chile ❍ Sika SA Chile, Santiago CLP MN 4,430 100 ◆ ★ ✲ Colombia ❍ Sika Colombia SA, Tocancipá COP MN 14,500 100 ◆ ★ Costa Rica ✜ Sika productos para la construcción SA, Heredia CRC 153,245 100 Dom. Republic ✜ Sika Dominicana SA, Santo Domingo D.N. DOP 12,150 100 Ecuador ❍ Sika Ecuatoriana SA, Guayaquil USD 1,982 100 ◆ ★ Guatemala m Sika Guatemala SA, Ciudad de Guatemala GTQ 2,440 100 Mexico ❍ Sika Mexicana SA de CV, Querétaro MXN 40,053 100 ◆ ★ ▲ Immobiliara Teximper SA de CV, Altamira MXN 7,842 100 ▲ Operadora Nacional de Recursos Humanos Especializados SA MXN 50 100 de CV, Altamira Panama ✜ Sika Panamá SA, Ciudad de Panamá USD 200 100 ▲ Sika Latin America Mgt. Inc, Ciudad de Panamá USD 10 100 Paraguay ❍ Inatec S.R.L., AsunciÓn PYG MN 10 100 Peru ❍ Sika Perú SA, Lima PEN 3,500 100 ◆ ★ Uruguay ❍ Sika Uruguay SA, Montevideo UYP 22,800 100 ◆ ★ Venezuela ❍ Sika Venezuela SA, Valencia VEF 3,398 100

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 127 Country Company 1 Capital stock % holding Certifi- in thousands cation

Asia/Pacific Australia ❍ Sika Australia Pty. Ltd., Wetherill Park AUD 4,000 100 ◆ ★ ✲ Cambodia ✜ Sika (Cambodia) Ltd., Phnom Penh KHR 422,000 100 China ❍ Sika (China) Ltd., Suzhou USD 35,000 100 ◆ ★ ✲ ❍ Sika Sarnafil Waterproofing Systems (Shanghai) Ltd., USD 22,800 100 ◆ ★ ✲ Shanghai ❍ Sika Guangzhou Ltd., Guangzhou CNY 80,730 100 ◆ ★ ❍ Sika Ltd., Dalian CNY 45,317 100 ◆ ✜ Sika (Guangzhou) Trading Company Ltd., Guangzhou CNY 3,723 100 ❍ Sichuan Keshuai Admixture Co. Ltd., Chengdu CNY 10,000 100 ◆ ❍ Jiangsu TMS Concrete Admixture Co. Ltd., Zhengjiang CNY 24,500 100 ◆ ★ ✲ ❍ Hebei Jiuqiang Building Material Co. Ltd., Zhengding County CNY 30,000 67 ◆ ★ ✲ Hong Kong ❍ Sika Hong Kong Ltd., Shatin HKD 30,000 100 ◆ ★ India ❍ Sika India Private Ltd., Mumbai INR 45,000 100 ◆ ★ ❍ Texsa India Ltd., Haryana INR 20,000 100 ◆ ★ Indonesia ❍ Sika Indonesia P.T., Bogor IDR MN 3,282 100 ◆ ★ Japan ❍ Sika Ltd., Tokyo JPY 490,000 100 ◆ ★ ✜ Dic Proofing Co. Ltd., Tokyo JPY 90,000 100 ❍ Dyflex Co. Ltd., Tokyo JPY 315,175 100 ◆ ★ z DCS Kyoshin Co. Ltd., Tokyo JPY 30,000 100 Korea ❍ Sika Korea Ltd., Ansong-City Kyunggi-do KRW MN 5,596 100 ◆ ★ Malaysia ❍ Sika Kimia Sdn. Bhd., Nilai MYR 5,000 100 ◆ ★ ▲ Sika Harta Sdn. Bhd., Nilai MYR 10,000 100 ❍ LCS Optiroc Sdn Bhd, Johor Bahru MYR 500 100 Mongolia ❍ Sika Mongolia LLC, Ulaanbaatar MNT 278,884 100 New Zealand ❍ Sika (NZ) Ltd., Auckland NZD 1,100 100 ◆ ★ Philippines ❍ Sika Philippines Inc., Manila PHP 56,000 100 ◆ ★ Singapore ❍ Sika Singapore Pte. Ltd., Singapore SGD 400 100 ◆ ▲ Sika Asia Pacific Mgt. Pte. Ltd., Singapore SGD 100 100 ❍ LCS Optiroc Pte Ltd, Singapore SGD 1000 100 ◆ Sri Lanka ✜ Sika Lanka (Private) Limited, Colombo LKR 129,100 100 Taiwan ❍ Sika Taiwan Ltd., Taoyuan County TWD 40,000 100 ◆ ★ Thailand ❍ Sika (Thailand) Ltd., Cholburi THB 200,000 100 ◆ ★ Vietnam ❍ Sika Limited (Vietnam), Dong Nai Province VND MN 44,190 100 ◆ ★

❏ Production, sales, construction contracting m Production and sales < Sales s Real estate and service companies z Construction contracting

◆ ISO 9001 (Quality Management) ★ ISO 14001 (Environmental Management) ✲ OHSAS 18001 (Occupational Health and Safety)

1 For associated companies see note 7.

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 128 REPORT OF THE STATUTORY AUDITORS TO THE ANNUAL GENERAL MEETING OF SIKA AG, BAAR

REPORT OF THE STATUTORY AUDITOR ON THE CONSOLIDATED FINANCIAL STATEMENTS As statutory auditor, we have audited the consolidated financial statements of Sika AG, which comprise the balance sheet, income statement, statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes (pages 79 to 128 of the download pdf of this report) for the year ended on December 31, 2014.

BOARD OF DIRECTORS’ RESPONSIBILITY. The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing, and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law, Swiss Auditing Standards and International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION. In our opinion, the consolidated financial statements for the year ended December 31, 2014 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with IFRS and comply with Swiss law.

REPORT ON OTHER LEGAL REQUIREMENTS We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

Zug, February 25, 2015

ERNST & YOUNG LTD

BERNADETTE KOCH DANIELLE MATTER Licensed audit expert Licensed audit expert (Auditor in charge)

SIKA ANNUAL REPORT 2014 Appendix to the consolidated financial statements 129 FIVE-YEAR REVIEWS

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31 in CHF mn 2010 2011 2012 2013 2014

Cash and cash equivalents 938.4 536.0 994.2 1,028.3 898.8 Accounts receivable a 780.6 875.3 871.5 912.7 1,006.0 Inventories b 499.7 530.6 521.6 539.0 591.3 Other current assets 1 132.3 109.8 110.4 110.9 100.0 Current assets 2,351.0 2,051.7 2,497.7 2,590.9 2,596.1 Property, plant, and equipment 816.5 860.6 873.3 920.2 958.3 Intangible assets 630.9 771.0 742.3 1,066.9 1,074.6 Other non-current assets 2 142.4 154.0 166.9 157.9 188.9 Non-current assets 1,589.8 1,785.6 1,782.5 2,145.0 2,221.8

ASSETS 3,940.8 3,837.3 4,280.2 4,735.9 4,817.9

Accounts payable c 478.2 501.0 492.1 557.9 605.4 Bond 274.6 0.0 249.9 299.7 0.0 Other current liabilities 3 303.9 319.8 301.5 334.6 345.7 Current liabilities 1,056.7 820.8 1,043.5 1,192.2 951.1 Bonds 794.4 796.0 847.1 946.9 947.6 Non-current provisions, employee benefit obligation 223.7 342.3 351.6 305.9 400.7 Other non-current liabilities 4 106.4 138.0 128.2 154.7 135.2 Non-current liabilities 1,124.5 1,276.3 1,326.9 1,407.5 1,483.5 LIABILITIES 2,181.2 2,097.1 2,370.4 2,599.7 2,434.6 Capital stock 22.9 1.5 1.5 1.5 1.5 Treasury shares -69.9 -55.7 -27.6 -13.7 -10.8 Reserves 1,802.9 1,781.4 1,921.0 2,132.3 2,376.4 Equity attributable to Sika shareholders 1,755.9 1,727.2 1,894.9 2,120.1 2,367.1 Non-controlling interests 3.7 13.0 14.9 16.1 16.2 SHAREHOLDERS’ EQUITY d 1,759.6 1,740.2 1,909.8 2,136.2 2,383.3

LIABILITIES AND SHAREHOLDERS’ EQUITY e 3,940.8 3,837.3 4,280.2 4,735.9 4,817.9

1 Prepaid expenses and accrued income, other current assets. 2 Investments in associated companies, deferred tax assets, and other non-current assets. 3 Accrued expenses and deferred income, income tax liabilities, current provisions, and other current liabilities. 4 Deferred tax liabilities and other non-current liabilities.

SIKA ANNUAL REPORT 2014 Five-year reviews 130 CONSOLIDATED INCOME STATEMENT FROM JANUARY 1 TO DECEMBER 31 in CHF mn 2010 2011 2012 2013 2014

Net sales 4,421.8 4,563.7 4,828.9 5,142.2 5,571.3 Material expenses -2,036.9 -2,259.1 -2,309.6 -2,446.6 -2,620.0 Gross result 2,384.9 2,304.6 2,519.3 2,695.6 2,951.3 Personnel expenses -953.7 -959.9 -1,037.2 -1,031.1 -1,093.7 Other operating expenses -854.5 -867.3 -909.0 -988.6 -1,059.3 Operating profit before depreciation 576.7 477.4 573.1 675.9 798.3 Depreciation/amortization/impairment -137.5 -130.3 -140.1 -152.4 -165.1 Operating profit 439.2 347.1 433.0 523.5 633.2 Interest income/interest expense -30.0 -28.4 -31.1 -30.9 -27.8 Financial income/financial expense/income from associated companies -5.8 -3.2 -12.1 -15.9 -14.8 Profit before taxes 403.4 315.5 389.8 476.7 590.6 Income taxes -92.8 -100.7 -111.3 -132.0 -149.4 Net profit 310.6 214.8 278.5 344.7 441.2 Free cash flow 244.0 35.4 288.3 19.0 349.8 Gross result as % of net sales 53.9 50.5 52.2 52.4 53.0 Operating profit as % of net sales 9.9 7.6 9.0 10.2 11.4 Net profit as % of net sales (ROS) 7.0 4.7 5.8 6.7 7.9 Net profit as % of shareholders’ equity (ROE) 17.7 12.3 14.6 16.1 18.5

KEY BALANCE SHEET DATA in CHF mn Calculation 2010 2011 2012 2013 2014

Net working capital (a+b-c) 802.1 904.9 901.0 893.8 991.9 Net working capital as % of net sales 18.1 19.8 18.7 17.4 17.8 Net debt 1 f 165.2 338.7 155.5 271.4 82.5 Gearing in % (f : d) 9.4 19.5 8.1 12.7 3.5 Equity ratio in % (d : e) 44.7 45.3 44.6 45.1 49.5

1 Net debt: interest-bearing indebtedness (short and long-term bank debt, bonds and other current and non-current liabilities “other”) less interest-bearing current assets (cash and cash equivalents and securities).

VALUE-BASED KEY DATA in CHF mn Calculation 2010 2011 2012 2013 2014

Capital employed 1 2,086.3 2,351.5 2,334.2 2,662.6 2,782.0 Annual average of capital employed g 2,063.8 2,218.9 2,342.9 2,498.4 2,722.3 Operating profit h 439.2 347.1 433.0 523.5 633.2 Return on capital employed (ROCE) in % (h : g) 21.3 15.6 18.5 21.0 23.3

1 Capital employed: current assets, PPE, intangible assets less cash and cash equivalents, current securities, current liabilities (excluding bank loans and bond).

SIKA ANNUAL REPORT 2014 Five-year reviews 131 SEGMENT INFORMATION

EMEA North America in CHF mn 2010 2011 2012 2013 1 2014 2010 2011 2012 2013 1 2014

Net sales 2,429 2,339 2,275 2,470 2,734 589 617 706 711 746 Operating profit 266 171 223 281 369 56 51 69 89 103 in % of net sales 11.0 7.3 9.8 11.4 13.5 9.5 8.3 9.8 12.5 13.8 Depreciation/amortization 65 59 70 79 85 25 22 24 23 21 Impairment 2 1 0 0 0 0 0 0 0 0 Capital expenditures 58 58 58 75 71 9 13 14 11 12

Latin America Asia/Pacific in CHF mn 2010 2011 2012 2013 1 2014 2010 2011 2012 2013 1 2014

Net sales 478 507 586 623 638 715 838 932 974 1,040 Operating profit 88 94 107 116 114 96 98 116 138 153 in % of net sales 18.4 18.5 18.3 18.6 17.9 13.4 11.7 12.3 14.2 14.7 Depreciation/amortization 6 6 6 9 11 17 20 20 21 23 Impairment 0 0 0 0 0 0 0 0 0 0 Capital expenditures 11 19 24 27 25 13 19 24 25 24

Other segments and activities Total in CHF mn 2010 2011 2012 2013 1 2014 2010 2011 2012 2013 1 2014

Net sales 211 263 330 364 413 4,422 4,564 4,829 5,142 5,571 Operating profit -67 -67 -82 -101 -106 439 347 433 523 633 in % of net sales 9.9 7.6 9.0 10.2 11.4 Depreciation/amortization 23 22 20 20 25 136 129 140 152 165 Impairment 0 0 0 0 0 2 1 0 0 0 Capital expenditures 9 8 11 16 21 100 117 131 154 153

1 R estated.

SIKA ANNUAL REPORT 2014 Five-year reviews 132 EMPLOYEES

2010 2011 2012 2013 2014

Employees by region (at December 31) EMEA 7,178 8,059 7,956 8,658 8,708 Switzerland 1,912 2,312 2,164 2,012 2,029 Germany 1,321 1,417 1,440 1,784 1,777 France 603 595 582 643 637 North America 1,360 1,491 1,437 1,438 1,488 USA 1,189 1,256 1,218 1,216 1,275 Latin America 1,703 2,101 2,170 2,329 2,609 Brazil 244 530 508 504 755 Asia/Pacific 3,241 3,603 3,670 3,868 4,090 China 1,115 1,331 1,286 1,287 1,220 Japan 614 608 615 614 629

Total 13,482 15,254 15,233 16,293 16,895

Personnel expenses (in CHF mn) Wages and salaries 775 789 837 849 894 Social charges, other 178 171 200 182 200 Personnel expenses 953 960 1,037 1,031 1,094 Personnel expenses as % of net sales 22 21 21 20 20 Key data per employee (in CHF 1,000) Net sales 342 318 317 326 336 Net value-added 1 108 92 96 98 103

1 See next page, Five-year Reviews, Value-Added Statement.

SIKA ANNUAL REPORT 2014 Five-year reviews 133 VALUE-ADDED STATEMENT in CHF mn 2010 2011 2012 2013 2014

Source of value-added Corporate performance (net sales) 4,422 4,564 4,829 5,142 5,571 Intermediate inputs -2,914 -3,127 -3,212 -3,440 -3,691 Gross value-added 1,508 1,437 1,617 1,702 1,880 Non-liquidity related expenses Depreciation and amortization -138 -130 -140 -152 -165 Change in provisions 23 8 -12 -8 0 Net value-added 1,393 1,315 1,465 1,542 1,715 Distribution of value-added To employees Wages and salaries 775 789 837 849 894 Social charges 179 171 207 188 205 To governments (income taxes) 93 101 111 132 149 To lenders (financial expenses) 35 39 31 28 26 To shareholders (dividend pay-out, incl. minority interests) 112 134 114 130 146 To the company Net profit for the year 311 215 279 345 441 Less dividend pay-out -112 -134 -114 -130 -146 Net value-added 1,393 1,315 1,465 1,542 1,715 Number of employees End of year 13,482 15,254 15,233 16,293 16,895 Annual average 12,926 14,368 15,244 15,763 16,594 Net value-added per employee (in CHF 1,000) 108 92 96 98 103

SIKA ANNUAL REPORT 2014 Five-year reviews 134 SIKA AG FINANCIAL STATEMENTS

SIKA AG BALANCE SHEET AS OF DECEMBER 31 in CHF mn Notes 2013 2014

Cash in bank 1 623.5 591.9 Securities 0.1 0.1 Accounts receivable from subsidiaries 2 704.2 448.4 Accounts receivable from third parties 2 3.3 3.2 Treasury shares 3 13.7 10.5 Current assets 1,344.8 1,054.1 Property, plant, and equipment and other intangible assets 4 0.0 0.5 Trademark licenses 5 4.4 19.8 Investments 6 2,009.6 2,109.1 Long-term loans and other non-current assets 3.1 2.3 Non-current assets 2,017.1 2,131.7

ASSETS 3,361.9 3,185.8

Accounts payable to subsidiaries 7 207.3 195.8 Accounts payable to third parties 7 14.3 4.5 Bond 9 300.0 0.0 Accrued expenses and deferred income 8 21.8 18.3 Current liabilities 543.4 218.6 Other non-current liabilities 9 9.7 4.8 Bonds 9 950.0 950.0 Provisions for risks related to investments 10 125.8 165.3 Non-current liabilities 1,085.5 1,120.1 LIABILITIES 1,628.9 1,338.7 Capital stock 1.5 1.5 Legal reserves 74.2 71.3 Free reserves 107.9 110.8 Retained earnings 1,549.4 1,663.5 Shareholders’ equity 11 1,733.0 1,847.1

LIABILITIES AND SHAREHOLDERS’ EQUITY 3,361.9 3,185.8

SIKA ANNUAL REPORT 2014 Sika AG financial statements 135 SIKA AG INCOME STATEMENT FROM JANUARY 1 TO DECEMBER 31 in CHF mn Notes 2013 2014

Income from subsidiaries 13 185.3 266.9 Financial income 14 22.0 30.9 Trademark licenses 42.4 65.0 Other income 15 10.7 29.3 Income 260.4 392.1

Administrative expenses 16 19.1 20.3 Personnel expenses 17 5.4 15.5 Financial expenses 18 36.5 44.9 Taxes 4.6 5.5 Depreciation/change in provisions 19 7.0 45.7 Other expenses 3.2 1.5 Expenses 75.8 133.4

NET PROFIT FOR THE YEAR 184.6 258.7

SIKA ANNUAL REPORT 2014 Sika AG financial statements 136 NOTES TO THE SIKA AG FINANCIAL STATEMENTS

1. CASH IN BANK CHF 591.9 MN (CHF 623.5 MN) All bank deposits are held in interest-bearing accounts. Bank deposits are invested in Swiss francs in the amount of CHF 564.6 million (CHF 586.5 million) and in foreign currencies of CHF 27.3 million (CHF 37.0 million).

2. ACCOUNTS RECEIVABLE FROM SUBSIDIARIES AND THIRD PARTIES CHF 451.6 MN (CHF 707.5 MN) Receivables consist mainly of loans to subsidiaries in the amount of CHF 402.2 million (CHF 653.1 million).

Sika AG has additional receivables of CHF 46.2 million (CHF 51.1 million) due from Sika subsidiaries on open accounts.

Receivables from third parties of CHF 3.2 million (CHF 3.3 million) include CHF 0.7 million (CHF 0.8 million) in credits from the Swiss tax authorities, CHF 1.7 million (CHF 1.7 million) from an insurance company and other receivables of CHF 0.8 million (CHF 0.8 million).

3. TREASURY SHARES CHF 10.5 MN (CHF 13.7 MN) Treasury shares are appropriated for Group-wide share-based payment plans and used to invest liquidity.

Bearer shares Registered shares Total nominal value CHF 0.60 nominal value CHF 0.10 in CHF mn Units Units

At January 1, 2013 14,497 27.6 0.0 0.0 27.6 Reductions -17,092 -35.8 -35.8 Additions 9,114 21.9 21.9 At December 31, 2013 6,519 13.7 0.0 0.0 13.7 – At January 1, 2014 6,519 13.7 0.0 0.0 13.7 Reductions -9,671 -27.2 -27.2 Additions 7,413 24.3 24.3 Valuation adjustment -0.3 -0.3

At December 31, 2014 4,261 10.5 0.0 0.0 10.5

4. PROPERTY, PLANT, AND EQUIPMENT AND OTHER INTANGIBLE ASSETS CHF 0.5 MN (CHF 1.00 P. M.) Property, plant, and equipment and other intangible assets are capitalized and depreciated over their useful life. Up until now, they were depreciated in the year of acquisition and included as pro memoria items at CHF 1.00. The fire insurance value amounts to CHF 1.8 million (CHF 0.6 million).

5. TRADEMARK LICENSES CHF 19.8 MN (CHF 4.4 MN) The increase in trademark licenses is mainly based on acquisition activity. Capitalized trademark licenses are amortized straight-line.

6. INVESTMENTS CHF 2,109.1 MN (CHF 2,009.6 MN) The change in shareholdings is essentially attributable to the acquisition of new subsidiaries, foundation of subsidiaries and capital increases. Major participations are indicated in the list of Group companies beginning on page 125 of the download pdf of this report.

SIKA ANNUAL REPORT 2014 Sika AG financial statements 137 7. ACCOUNTS PAYABLE TO SUBSIDIARIES AND THIRD PARTIES CHF 200.3 MN (CHF 221.6 MN) The total includes CHF 195.8 million (CHF 207.3 million) in liabilities to Sika subsidiaries, resulting from the worldwide cash management concept. Other liabilities amount to CHF 4.5 million (CHF 14.3 million). This includes short-term, conditional purchase price obligations in the amount of 3.2 million (CHF 5.6 million) and other liabilities of CHF 1.2 million (CHF 8.7 million).

8. ACCRUED EXPENSES AND DEFERRED INCOME CHF 18.3 MN (CHF 21.8 MN) Accrued expenses and deferred income includes pro rata interest of CHF 8.2 million (CHF 14.2 million), employee-related accruals of CHF 5.4 million (CHF 2.0 million) as well as other accrued expenses of CHF 4.7 million (CHF 5.6 million).

9. BONDS AND OTHER NON-CURRENT LIABILITIES CHF 0.0 MN SHORT-TERM/CHF 950.0 MN LONG-TERM (CHF 300.0 MN/CHF 950.0 MN) AND CHF 4.8 MN (CHF 9.7 MN) In June 2014 one bond in the amount of CHF 300.0 million was repaid.

2.875% fixed-interest bond 2006 – 3/23/2016 CHF 250.0 MN 1.000% fixed-interest bond 2012 – 7/12/2018 CHF 150.0 MN 1.125% fixed-interest bond 2013 – 11/14/2019 CHF 200.0 MN 1.750% fixed-interest bond 2012 – 7/12/2022 CHF 150.0 MN 1.875% fixed-interest bond 2013 – 11/14/2023 CHF 200.0 MN

Other long-term liabilities contain long-term conditional purchase price obligations of CHF 2.2 million (CHF 7.3 million) and other liabilities of CHF 2.6 million (CHF 2.4 million).

10. PROVISIONS FOR RISKS RELATED TO INVESTMENTS CHF 165.3 MN (CHF 125.8 MN) The increase in provision mainly relates to a general provision for risks related to participations in the amount of CHF 40.0 million.

Provisions for credit risks were decreased by CHF 0.5 million. They relate to the economic, financial, and political risks of the subsidiaries.

11. SHAREHOLDERS’ EQUITY CHF 1,847.1 MN (CHF 1,773.0 MN) Shareholders’ equity surpasses the previous year’s level. The ratio of shareholders’ equity to balance sheet total increased from 51.5% to 58.0%.

Capital General Capital Reserve for Retained Share stock statutory contribution treasury earnings holders’ in CHF mn reserve reserves shares equity

January 1, 2013 1.5 60.2 0.3 27.6 1,588.0 1,677.6 Dividend payment -129.2 -129.2 Transactions with treasury shares -13.9 13.9 0.0 Net profit for the year 184.6 184.6 December 31, 2013 1.5 60.2 0.3 13.7 1,657.3 1,733.0

January 1, 2014 1.5 60.2 0.3 13.7 1,657.3 1,733.0 Dividend payment -144.6 -144.6 Transactions with treasury shares -2.9 2.9 0.0 Net profit for the year 258.7 258.7 December 31, 2014 1.5 60.2 0.3 10.8 1,774.3 1,847.1

SIKA ANNUAL REPORT 2014 Sika AG financial statements 138 The capital stock remains unchanged. Net profit for the year reflects the regular business activities. The increase was mainly due to increased income from subsidiaries. A dividend of CHF 144.6 million was distributed to shareholders in April 2014. In accordance with the Swiss Code of Obligations, reserves for treasury shares are to be reported separately.

On December 31, 2014, the company had 56 (54) registered shareholders. Information regarding major shareholders can be found on page 123 of the download pdf of this report.

There is CHF 155,893.20 in contingent capital, unrestricted in time, comprising 259,822 bearer shares with a per-share nominal value of CHF 0.60. These shares are reserved for the exercise of option or conversion rights.

The capital stock consists of: Bearer shares 1 Registered shares Total 1 nominal value CHF 0.60 nominal value CHF 0.10

12/31/2013 (units) 2,151,199 2,333,874 4,485,073 Nominal value (CHF) 1,290,719 233,387 1,524,107

12/31/2014 (units) 2,151,199 2,333,874 4,485,073 Nominal value (CHF) 1,290,719 233,387 1,524,107

1 Includes treasury shares which do not carry voting and dividend rights.

12. CONTINGENT LIABILITIES Letters of guarantee and letters of comfort are issued to finance business transactions. No guarantees are required for any established zero-balanced cash pooling. Sika AG is part of the Sika Schweiz AG value-added tax group and is jointly and severally liable to the tax authorities for the value-added tax obligations of the tax group.

in CHF mn 2013 2014

Letters of guarantee Issued 116.1 109.3 Used 0.0 0.0

Letters of comfort Issued 2.2 2.6 Used 0.1 0.2

Credit lines to subsidiaries Issued 4.1 4.0 Used 0.2 0.1

SIKA ANNUAL REPORT 2014 Sika AG financial statements 139 13. INCOME FROM SUBSIDIARIES CHF 266.9 MN (CHF 185.3 MN) The income from subsidiaries includes dividend distributions.

14. FINANCIAL INCOME CHF 30.9 MN (CHF 22.0 MN) Financial income includes interest income and gains from foreign exchange transactions.

15. OTHER INCOME CHF 29.3 MN (CHF 10.7 MN) Other income mainly includes a payment of compensation from Sika Finanz AG of CHF 11.8 million (CHF 9.2 million) for the OECD transfer pricing risks which are covered by Sika AG as well as other valuation adjustments and other income.

16. ADMINISTRATIVE EXPENSES CHF 20.3 MN (CHF 19.1 MN) Administrative expenses include mainly expenses for the holding company.

17. PERSONNEL EXPENSES CHF 15.5 MN (CHF 5.4 MN) The increase in personnel expenses is mainly based on the transfer of employees from Sika Services AG into Sika AG.

18. FINANCIAL EXPENSES CHF 44.9 MN (CHF 36.5 MN) Financial expenses mainly include the cost of interest on loans as well as foreign currency losses from foreign exchange transactions and loans.

19. DEPRECIATION/CHANGE IN PROVISION CHF 45.7 MN (CHF 7.0 MN) This item includes changes in provisions of CHF 39.5 million (CHF 5.1 million) and amortization of trademark licenses in the amount of CHF 6.2 million (CHF 1.9 million).

SIKA ANNUAL REPORT 2014 Sika AG financial statements 140 20. PARTICIPATIONS IN SIKA AG Members of the Board of Directors and Group Management hold the following participations in Sika AG:

Number of shares Number of warrants (potential voting rights) 2013 2014 2013 2014

Board of Directors Paul Hälg, Chairman 350 490 0 0 Urs F. Burkard 1 190 770 0 0 Willi K. Leimer 26 52 0 0 Monika Ribar 48 74 0 0 Daniel J. Sauter 2,026 2,052 0 0 Ulrich W. Suter 26 52 0 0 Christoph Tobler 326 252 0 0 Frits van Dijk 51 102 0 0 Jürgen Tinggren n.a. 84 n.a. 0

Group Management Jan Jenisch, CEO 1,350 1,400 0 0 Silvio Ponti, deputy CEO 1,042 1,309 0 0 Christoph Ganz 342 374 0 0 Thomas Hasler n.a. 153 0 0 Urs Mäder 354 n.a. 0 n.a. Ernesto Schümperli 534 695 0 0 Paul Schuler 701 861 0 0 Ronald Trächsel 963 n.a. 0 n.a. José Luis Vásquez 885 1,103 0 0 Heinz Gisel 224 287 0 0 Adrian Widmer n.a. 123 n.a. 0

Total 9,438 10,233 0 0

1 Urs. F. Burkard also has an interest in the Schenker-Winkler Holding, which according to information provided by the family holds 2,373,572 Sika AG shares.

21. INFORMATION ON EXECUTION OF RISK ASSESSMENT Risk management is carried out by the Board of Directors of Sika AG and by Group Management. The Board of Directors is the highest authority for risk assessment. The Board assesses risks annually at the level of the Group and Sika AG. Group Management regularly reviews the processes which form the basis for risk management. The risk management process comprises four steps: risk identification, risk assessment, risk monitoring, and risk controlling.

Information on the Group-wide risk assessment processes can be found in note 24 to the Consolidated Financial Statements.

SIKA ANNUAL REPORT 2014 Sika AG financial statements 141 PROPOSAL BY THE BOARD OF DIRECTORS

THE BOARD OF DIRECTORS PROPOSES TO THE ANNUAL GENERAL MEETING THE FOLLOWING APPROPRIATION OF RETAINED EARNINGS: in CHF mn 2013 2014

Composition of retained earnings Net profit for the year 184.6 258.7 Profit brought forward 1,364.8 1,404.8 Total for disposition to Annual General Meeting 1,549.4 1,663.5 Dividend payment Dividend payment out of retained earnings 1 144.6 182.6

Retained earnings carried forward 1,404.8 1,480.9

1 Dividend payment for shares entitled to dividends (without treasury shares as per December 31, 2014).

As the general statutory reserve currently exceeds 20% of shareholders’ equity, a further allocation to the reserve was waived.

SIKA ANNUAL REPORT 2014 Sika AG financial statements 142 On approval of this proposal, the following payment will be made: in CHF 2013 2014

Bearer share 1 nominal value CHF 0.60 Gross dividend 57.00 72.00 35% withholding tax on gross dividend 19.95 25.20 Net dividend 37.05 46.80

Registered share nominal value CHF 0.10 Gross dividend 9.50 12.00 35% withholding tax on gross dividend 3.33 4.20 Net dividend 6.17 7.80

1 Bearer shares held by Sika AG are non-voting shares and do not qualify for a dividend.

Payment of the dividend is tentatively scheduled for Monday, April 20, 2015, upon presentation of coupon no. 25 for bearer shares.

Registered shareholders will receive payment of the dividend at the address provided to the company for purposes of dividend distribution.

The Annual General Meeting of Sika AG will be held on Tuesday, April 14, 2015.

Baar, February 25, 2015

For the Board of Directors The Chairman: DR. PAUL HÄLG

SIKA ANNUAL REPORT 2014 Sika AG financial statements 143 REPORT OF THE STATUTORY AUDITORS TO THE ANNUAL GENERAL MEETING OF SIKA AG, BAAR

REPORT OF THE STATUTORY AUDITOR ON THE FINANCIAL STATEMENTS As statutory auditor, we have audited the financial statements of Sika AG, which comprise the balance sheet, income statement, and notes (pages 135 to 143 of the download pdf of this report) for the year ended December 31, 2014.

BOARD OF DIRECTORS’ RESPONSIBILITY. The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing, and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

AUDITOR’S RESPONSIBILITY. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION. In our opinion, the financial statements for the year ended December 31, 2014 comply with Swiss law and the company’s articles of incorporation.

REPORT ON OTHER LEGAL REQUIREMENTS We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 Code of Obligations, CO, and article 11 AOA) and that there are no circumstances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.

Zug, February 25, 2015

ERNST & YOUNG LTD

BERNADETTE KOCH DANIELLE MATTER Licensed audit expert Licensed audit expert (Auditor in charge)

SIKA ANNUAL REPORT 2014 Sika AG financial statements 144 Financial Calendar

Sales first quarter 2015 tuesday, April 14, 2015

47th Annual General Meeting tuesday, April 14, 2015

Dividend payment monday, April 20, 2015

Half-year Report 2015 Friday, July 24, 2015

Result first nine months 2015 thursday, October 29, 2015

Net sales 2015 tuesday, January 12, 2016

Media conference / analyst presentation Friday, February 26, 2016 full-year results 2015

Sika Annual Report 2014 Financial Calendar 145 Imprint

Published By Sika AG Zugerstrasse 50 6341 Baar Switzerland

Tel. +41 58 436 68 00 Fax +41 58 436 68 50 [email protected] www.sika.com

Project Team Corporate Communications & Investor Relations and Corporate Finance Sika AG, Baar

Concept, Design, REalization Ramstein Ehinger Associates AG, Zurich

Text Sika

Editorial Work Zoebeli Communications, Bern Ramstein Ehinger Associates AG, Zurich

Print Kalt Medien AG, Zug

Photography Marc Eggimann, Basel Henrik Spohler, Hamburg Ross Woodhall, Telford Corbis

Sika Annual Report 2014 Imprint 146 Sika AG Contact Zugerstrasse 50 Phone +41 58 436 68 00 6341 Baar Fax +41 58 436 68 50 Sika Annual Report 2014 Switzerland www.sika.com Imprint 147